Decimal Software : Quarterly Report and Update - Q4 2017

Tuesday 25 July 2017 Decimal Quarterly Report and Update - Q4 2017 HIGHLIGHTS

• 76% Annual Recurring Revenue (ARR) growth YoY
• 31% Revenue Growth in Q4
• AMP enters commercial pilot
• Former ASFA CEO Vamos appointed to Decimal Board
• Compliance bar raised after completion of independent report on ASIC Guidelines
• Mercer goes live with Eqilize for its 2 million customers

Decimal Software Limited (ASX: DSX; "Decimal" or "the Company") is pleased to provide this update on its financial and operational performance for the quarter ended 30 June 2017.

Appendix 4C quarterly cash flow report follows this update.

1. OPERATIONAL UPDATE

   Decimal is continuing to focus on its core markets in Australian superannuation and banking, and is currently delivering several key projects across those sectors including a paid pilot with AMP Limited's direct advice business.

   The Company continues to build its Annual Recurring Revenue (ARR) streams, with further growth over the quarter increasing the year-on-year (YoY) revenue by 76 per cent. Quarterly Revenue grew 31 per cent in the fourth quarter, while expenses were up slightly at 8 per cent.

   Funds Under Advice has now reached a total of $8.48 billion.

   The Eqilize solution will be offered by Mercer to more than 2 million members in the Mercer Super Trust (MST) as well as the 170 funds under its administration.

   Decimal welcomed new Non-Executive Director Pauline Vamos to its Board, with the former CEO of Association of Superannuation Funds of Australia (ASFA) adding further significant industry strength to the team. In July Ms Vamos was also appointed to the Board of Mercer Superannuation (Australia) Limited (Mercer).

2. SIGNIFICANT GROWTH IN REVENUE AND ARR

   Decimal recorded a revenue growth of 31 per cent for the quarter with a total of $338,703. In addition, ARR continued to grow with an increase of 76 per cent YoY to $646,160 for FY2017, compared to $366,809 YoY in FY2016. This is exclusive of the contracted pilots in delivery.

   Decimal Annual Recurring Revenue (ARR)

   1,000,000

   900,000

   800,000

   700,000

   600,000

   500,000

   400,000

   300,000

   200,000

   100,000

   ‐

   Q3 ‐ Mar‐16 Q4 ‐ Jun‐16 Q1 ‐ Sep‐16 Q2 ‐ Dec‐16 Q3 ‐ Mar‐17 Q4 ‐ Jun‐17

   ARR Contracted Pilots

3. AMP ENTERS COMMERCIAL PILOT

   In April Decimal has signed a pilot contract to trial its software in AMP Limited's direct advice business.

   The scope involves the automatic generation of compliant Statement of Advice (SOA) documents for the direct advice team. The engagement is a paid pilot under standard commercial terms.

4. FORMER ASFA CEO PAULINE VAMOS JOINS BOARD

   The company is pleased to announce that distinguished financial services expert and former CEO of ASFA Pauline Vamos has been appointed as a Non-Executive Director to the Company's Board.

   Ms Vamos is highly regarded globally as an executive leader and ambassador in financial services, complemented by her extensive superannuation knowledge and expertise.

   She was CEO of ASFA for nine years and previously was Director, Financial Services Regulation - Licensing and Business Operations with ASIC.

5. DECIMAL RAISES COMPLIANCE BAR WITH INDEPENDENT REPORT

   An independent review of Decimal's software against the requirements of the Australian Securities and Investments Commission's (ASIC) Regulatory Guide 255 (RG255) was successfully completed during the quarter.

   The review was undertaken by leading global risk management and regulatory compliance firm Promontory Financial Group Australasia, an IBM Company. Proactively commissioned by Decimal, the aim was to assess how effectively the technology enabled superannuation funds and banks to provide compliant advisory services in line with ASIC's RG255 guidelines on digital advice.

   The review gives the financial services sector greater confidence that Decimal, as an outsourced provider, understood their compliance needs and can manage third party risk.

6. MERCER GOES LIVE WITH EQILIZE

   Mercer Australia has successfully implemented Decimal's Eqilize solution. Mercer is one of Decimal's foundation clients and partners, and now has the capability to offer the Eqilize digital advice solution to more than two million Australians through its Mercer Super Trust (MST) and over 170 funds it administers. The successful implementation of Eqilize, which was completed within just a few months of the scope being agreed, positioned Mercer at the forefront of innovative, meaningful engagement with members.

   Appendix 4C Quarterly report for entities subject to Listing Rule 4.7B Appendix 4C

   +Rule 4.7B

   Quarterly report for entities subject to Listing Rule 4.7B

   Introduced 31/03/00 Amended 30/09/01, 24/10/05, 17/12/10, 01/09/16

   Name of entity

   DECIMAL SOFTWARE LIMITED

   ABN Quarter ended ("current quarter")

   31 009 235 956 30 JUNE 2017

   Consolidated statement of cash flows Currentquarter $A'000
7. Cash flows from operating activities Year to date (12 months) $A'000

8. Receipts from customers

9. Payments for

10. research and development

11. product manufacturing and operating costs

    286 1,169

    - -

    - -

12. advertising and marketing (124) (525)

13. leased assets - -

14. staff costs (972) (3,575)

15. administration and corporate costs (601) (1,731)

16. Dividends received (see note 3) - -

17. Interest received 12 46

18. Interest and other costs of finance paid - -

19. Income taxes paid - 1,499

20. Government grants and tax incentives - -

21. Other (provide details if material) - -

    1.9 Net cash from / (used in) operating activities (1,399) (3,117)
22. Cash flows from investing activities

23. Payments to acquire:

24. property, plant and equipment

    (7) (9)

25. businesses (see item 10) - -

26. investments - -

27. + See chapter 19 for defined terms

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