Datagate Investor Update – August 2018

August 2018 Investor Update
Prospect, customer and revenue growth | International Progress
Dear Investors
We hope you have been enjoying our regular newsletters.
This update provides you as investors with further detail on our recent activity, near-term and
longer-term plans as well as details on financial performance.
International Activity
In line with the plans we discussed with you during the capital raise last year, we are now
strongly focused on pursuing and closing international sales opportunities.
Our first US customer, who was also our first water industry customer “Ranch Hill Water
Supply Corp” went live in January this year and they are now a reference customer with an
excellent case study (refer attached).
Our first US managed service provider (MSP) customer “Dimension4” has now completed
their third month of billing on Datagate utilising our integration with Wolters Kluwer’s CCH
SureTax product with Datagate for US tax calculations and compliance. Dimension4 is now a
US reference customer, and we have an excellent case study resulting from this (refer
attached).
Our second American MSP customer “CCR” has also agreed to feature in a case study, which
we plan to produce in September.
We have a formal partnership established now with Wolters Kluwer’s CCH SureTax division
for calculating the complex American taxes on telecommunications invoices, and we are
receiving regular referrals of American sales leads from the CCH SureTax team and their tax
consultant partners.
Our association with business management software, ConnectWise continues to be beneficial
in driving new business for Datagate. In June, we sponsored a stand and presented at the
Sydney Connectwise conference attended by around 150 Connectwise customers. We
collected 59 Australian sales contacts for Datagate. In May, Datagate’s first Australian
customer was signed, a managed service provider in Melbourne and we have a building
pipeline of Australian sales opportunities.
The development team is completing several new integration functions with Connectwise.
Once complete we have a backlog of around 20 sales prospects that are interested in using
Datagate with Connectwise in the US, Australia, New Zealand and the UK.
In June, Mark attended the American Water Works Association annual conference (ACE18) to
explore opportunities for Datagate within the American water industry and meet with Danish
smart meter manufacturer, Kamstrup, who provides the smart meters for Datagate’s current
water customer based in Texas. Datagate is a good fit for Kampstrup as a billing system that
connects with its smart meter systems, and further discussions are taking place to formalise a
relationship between the two companies. Kamstrup is starting to refer sales opportunities to
Datagate and Mark is visiting Kamstrup’s American headquarters to meet with them in
September.

The Datagate marketing and sales team in New Zealand has been focusing on the US and
Australia during the last quarter. We currently have around 50 Australian leads for Datagate
that we are working to close.
We are finding a strong level of interest in Datagate from within the American MSP market and
Mark will be spending more time in the US in the second-half of the financial year to focus on
American sales.
In May, we opened a US bank account with Alpine Bank of Colorado and can now receive
funds from US customers directly into that account. This was not an easy task for a New
Zealand resident business to open an American bank account.
New Zealand activity
The NZ activity over the last 12 months has taught us the following important points:
1. There is considerable opportunity for growth in existing customers once they come on
board with Datagate. Datagate’ MRR grew 39% in the 12 months to 30 June 2018.
90% of this MRR growth was from customers that were existing on 1 July 2017.
2. The product is very sticky, Datagate had only 0.3% annual revenue churn in the last 12
months, this creates a long customer lifetime. We have planned on an average account
monthly revenue per month (ARPA) of $750 (currently average ARPA is $1,130 and
median RPA is $705) and customer lifetime of 5 years which would yield a lifetime
customer value of around $36k at an 80% gross margin. This ARPA is an average
value based on mostly NZ sales, but it should be noted that some of the current
opportunities in the sales pipeline have considerably higher potential monthly
revenues.
3. Sales cycles for utility billing solutions are long and require patience. In 2017, our
resources were focused on developing Datagate version 2 for the international market,
and Mark was the only sales capability until January 2018. We boosted our sales
team in February 2018 with a new account manager and sales development rep. We
have had ten new proposals signed this financial year. These customers have been or
are currently being on-boarded. This experience has also proved that we need a broad
pipeline with a long-term lead-nurture campaigns to ensure that Datagate is there when
prospects are ready to upgrade their billing system.
Product
Datagate version 2 is now available to all new customers, and the product is well-received
when demonstrated. We continue to migrate customers from version 1 to version 2 of the
product and have four customers still to migrate. A recent focus for Datagate has been
completing the Suretax integration, adding functionality to make customer on-boarding easier
and finalising aspects of the Connectwise integration for the US market.
Team
In response to a growing pipeline of closed customers and the prospect of Mark spending
more time in North America, Datagate has recruited a senior consultant to oversee customer-
facing activities from New Zealand. Headcount is currently at seven full-time employees plus
some part-time outsourced resource for development, marketing, US sales and finance.

Finances
Revenue
Datagate’s actual revenue performance over the past 18 months is set out in the graph below.
ARR at the end of July is $402k, a 41% increase over the previous 12 months. Given the
healthy sales pipeline from existing customers and new international customers, we are
forecasting for this rate of growth to accelerate over the next six months.

Costs
Datagate has managed its costs carefully over the last 12 months, transitioning expenditure
from development to marketing and sales as focus turned from building Datagate version 2 to
marketing and selling the product.
A summary of the Datagate cost profile for the last 12 months is set out below.

Some key points to note:
▪ Datagate secured Azure hosting sponsorship through the Microsoft bizspark
programme which covered almost all Datagate’s Azure cost during the period. Funds
under this sponsorship are now exhausted, and Datagate will be covering its Azure
costs going forward.
▪ September 2017 developments costs were impacted by a redundancy payment.
▪ November 2017 marketing costs increased due to expenditure on the Connectwise
conference in Florida.
Cash
The graph below sets out Datagate’s cash position over the last 12 months. Datagate raised
funds from existing investors in October 2017 and has used those funds to enhance the
Datagate product for international markets and build the sales pipeline of international
customers, particularly those using Connectwise and start prospecting into opportunities in
the water business.
On June 18, Datagate received cash from an R&D tax credit as an outcome of our work
developing the globally scalable storage infrastructure underpinning Datagate version 2. We
expect to receive further funds from the R&D tax credit once the FY18 tax return is submitted.
20k
40k
60k
80k
100k
120k
140k
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
Jun
Jul
2017
2018
NZD
Central Functions
Cost of sales
Marketing
Selling
Development Costs
Implementation and Support

Forecast
Datagate is currently forecasting cash burn to decline over the next six months, with new
revenues from existing customer growth and new customers come on-board. We have a
backlog of international customers waiting for completion of the US-specific Connectwise
integration which is due for completion in September.
Mark is up in the US late August/early September for a number of exciting meetings with
partners, (including SAP and Kamstrup) and current and potential customers. The outcome
of this trip and open opportunities in ANZ will be reviewed by the Datagate Board upon Mark’s
return and will be a key input into business and cash planning for the next six to nine months.
As we shift more and more from our pure New Zealand sales focus to a more global American
and Australasian sales focus, we will be engaging with more larger customers with larger
associated revenues. We have a very positive view of our revenue growth over the next year.
Summary
Thank you for your support of Datagate. We continue to be very excited about the
opportunities and look forward to reporting back to you again in October.

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“Datagate is fast to implement and simple
to work with – yet it easily handles the
complex tax challenges of businesses like
ours that operate nationwide.”
Anthony Zabit | Principal, Dimension4
America-wide MSP uses Datagate and
CCH SureTax for telecommunications
billing and compliance

Dimension4 is a leading provider of Cloud, data and voice
services to business customers throughout the United
States and Canada.
When it comes to billing their customers for
telecommunications services, Dimension4 uses the
Datagate billing solution. Datagate integrates with
CCH SureTax to generate telecommunications invoices
that include the taxes of each of their applicable
tax jurisdictions. Datagate uses call data
records (CDRs) supplied by Dimension4’s
telecommunications carriers – BroadCloud and
Sonus – to ensure invoicing accuracy. Datagate
produces invoices in PDF format, which it emails
to Dimension4’s customers.
“The service and support from Datagate is
excellent. They’ve proven to be a reliable and
strategic business partner for us and they help
make the complex job of telecommunications
billing and compliance easy,” says Dimension4
Principal, Anthony Zabit.
Dimension4 is required to file telecommunications tax
returns in all the tax jurisdictions in which their customers
reside. For tax and compliance advice and for filing their
returns they use Telecom Professionals Inc, a specialist
telecommunications tax and compliance consultancy.
Telecom Professionals collects all the data required to
file the various tax returns directly from the Datagate and
CCH SureTax systems.
“We use Telecom Professionals for telecommunications
tax advice and to further simplify and de-risk our voice
and data services business,” Anthony Zabit says.
CCH SureTax Communications costs and licensing
are included with the Datagate online billing
portal. Datagate’s partnerships with specialist
telecommunications tax accountants such as Telecom
Professionals of Oklahoma City and GSA of Atlanta,
make it easy for Datagate clients to file all applicable
U.S managed service provider (MSP) Dimension4 is using Datagate, SureTax
and ConnectWise to automate billing and tax compliance for its data and voice
services nation-wide.
Anthony Zabit | Principal, Dimension4
The Datagate/SureTax/ConnectWise combination
has proven itself as a smart choice for our
business.
“
“
Datagate Case Study | Dimension4
For more information
info@datagate-i.com
US Phone: +1 (904) 310 1723 AU Phone: +61 (2) 9133 8605 NZ Phone: +64 (9) 280 3626
www.datagate-i.com

compliance reports, telecommunications tax returns and
required payments.
Dimension4 found Datagate through ConnectWise, the
software Dimension4 uses to manage its MSP business.
Datagate enables ConnectWise customers to connect all
of their Datagate telecommunications billing into their
ConnectWise Manage environment. MSPs can view their
telephony services bills within the ConnectWise environment
and pass bills automatically into their accounting system.
Datagate shares customer account details with ConnectWise
Manage, slashing administration effort.
“The Datagate/SureTax/ConnectWise combination has proven
to be a smart choice for our business,” Anthony Zabit says.
ABOUT DIMENSION4
Dimension4 is a leading provider of secure cloud-based
data and voice solutions, delivering a full suite of timeless
technology and managed services for today’s global
enterprises. Dimension4’s ongoing commitment to top-
notch customer experience and timeless technology is a
direct reflection of its team of executives and technical
professionals. They bring vision, experience, know-how and
proven success to ensure Dimension4 solutions are always at
the forefront. The entire technical team is Microsoft and Cisco
certified. Dimension4 solutions are priced competitively so
customers can ‘do more with less’. Services span installation,
managed services and 24/7 technical & customer support.
See: dimension4.com for more.
“The service and support from
Datagate is excellent. They’ve proven
to be a reliable and strategic business
partner for us and they help make the
complex job of telecommunications
billing and compliance easy.”
Anthony Zabit | Principal, Dimension4
Highlights

SUMMARY
Leading U.S cloud managed service provider
Dimension4 has chosen Datagate to automate
billing and tax compliance for its data and voice
services.
Datagate takes the bulk minutes Dimension4
buys from its carriers and apportions them to the
individual Dimension4 call plans sold to clients.
Datagate emails individual bills – with full analysis -
to Dimension4 customers across the U.S.
Dimension4 also uses a Datagate/CCH SureTax
partner, Telecom Professionals, to automate
communications tax compliance, simplifying the
filing of tax returns in many different jurisdictions.
Dimension4 uses Datagate and CCH SureTax for
telecommunications billing and compliance
BUSINESS BENEFITS
fAutomatic on-billing
fAutomatic tax compliance
fView bills inside ConnectWise Manage
fFast to implement
fSimple to work with
KEY OUTCOMES
fSimplify voice and data business
fDe-risk voice and data service provision
f‘Excellent’ service and support
fAny carrier, any service
fReliable and strategic’
For more information
www.datagate-i.cominfo@datagate-i.com
US Phone: +1 (904) 310 1723 AU Phone: +61 (2) 9133 8605 NZ Phone: +64 (9) 280 3626
Datagate Case Study | Devoli

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“The customer service during the initial
setup was top notch and continues to
exceed all expectations.”
Laurie Sheranko | Treasurer/Secretary,
Ranch Hills Water Supply Corporation
Water supplier increases revenue by
26 percent with Datagate
Ranch Hills Water Supply Corporation (RHWSC) was
charging each customer a flat monthly rate for water while,
unfortunately, not generating enough revenue to cover
infrastructure repairs and maintenance.
“Our well needed repairs that we couldn’t afford,” says
Laurie Sheranko, Treasurer/Secretary for RHWSC.
“We needed to go to a true water usage-based
billing process, which would require a “bridge”
between the water meter reading software and the
accounting software we use – Datagate was the
answer.”
For RHWSC, Datagate was the crucial piece of
the new billing process that now allows the
company to keep up with necessary repairs
and maintenance. The water meters are
read electronically each month by Kamstrup
READy Manager™ and then Datagate takes that
information and generates the invoices. This alone is a time
saver, however Datagate goes a step further by importing
the invoices into RHWSC’s accounting software, Xero. This
new process provides electronic monitoring of water
consumption, so customers pay for what they actually use.
Thus the revenue is now actually matching the expense.
“After many hours of searching for a product that would
work with the software packages already in place, and
coming up empty handed, I posed the question to the Xero
online community. It was then that Datagate CEO Mark
Loveys reached out to me and offered to take a closer look
at what it was I was trying to accomplish. The rest is history,”
Laurie Sheranko says.
RHWSC used Datagate’s standard invoice template for the
first billing cycle. After that, Datagate made revisions to the
template as requested to make it exactly the way RHWSC
wanted it to appear.
“The customer service during the initial setup was top notch
and continues to exceed all expectations,” Laurie Sheranko
says.
A Texas water supply corporation increased monthly revenue by about 26 percent
and cut billing time by approximately two thirds using the Datagate cloud-based
billing and monetization platform to manage usage-based billing.
Laurie Sheranko | Treasurer/Secretary,
Ranch Hills Water Supply Corporation
Datagate is a speedy, cost effective way to link
meter reading software with your accounting
system – the perfect solution.
“
“
Datagate Case Study | Ranch Hills Water Supply Corporation
For more information
info@datagate-i.com
US Phone: +1 (904) 310 1723 NZ Phone: +64 (9) 280 3626 AU Phone: +61 (2) 9133 8605
www.datagate-i.com
Ranch Hills Water Supply Corporation

RHWSC customers now see exactly how much water they use
each month, and the rate charged per gallon of water used.
Rate structures may change from time to time, and if (or when)
necessary, Datagate is able to quickly and easily accommodate
these changes. Datagate also makes it simple to create an array
of pricing plans, allowing suppliers to vary charge rates based on
customer contracts or profiles.
“What used to take me three hours now takes me one. It’s
given me back more time to spend with my family,” says Laurie
Sheranko.
“I would recommend Datagate to other water suppliers. I’m
going to make it a point to talk to other water co-ops and let
them know about Datagate. It’s a speedy, cost effective way to
link meter reading software with your accounting system – the
perfect solution.
“Datagate gave us pricing that took into account our not-for-
profit status and I appreciate that so much. There was no long
process to get up and running. The Texas Commission on
Environmental Quality (TCEQ) helped us to prepare a rate study
which was then voted on by the RHWSC members. Once the
rates were adopted, we applied those to the gallons of water
used each month. It only took a month to get everything into
place including training on how to use the Datagate system.”



ABOUT RANCH HILLS WATER SUPPLY CORPORATION
Ranch Hills Water Supply Corporation is a Texas water supply
company. The corporation is not-for-profit, owned by its
customers who buy water. For more information, see: http://
www.buzzfile.com/business/Ranch-Hills-Wsc-830-510-6311
“I would recommend Datagate to other
water suppliers. I’m going to make it a
point to talk to other water co-ops and
let them know about Datagate.”
Laurie Sheranko | Treasurer/Secretary,
Ranch Hills Water Supply Corporation
Highlights



SUMMARY
Datagate has enabled Ranch Hills Water Supply
Corporation to increase revenue by 26 percent by
switching from a flat fee to usage-based billing.
Datagate connected the water reading system
Kamstrup READy Manager™ with Xero accounting
software used by RHWSC – a capability RHWSC could
not find anywhere else.
The extra revenue has enabled the company to
budget and pay for well repairs and other necessary
maintenance that will increase the quality of the water
supplied. Datagate cut billing time by two thirds.
Water supplier increases revenue
by 26 percent with Datagate
BUSINESS BENEFITS
βVisibility & control of recurring revenue
βIntegration between Kamstrup meter reading
system & Xero accounting software
βEasy revenue reporting & usage analysis
βFair & transparent billing
KEY OUTCOMES
βMonthly revenue up 26%
βInfrastructure investment is funded
βBilling time cut by two thirds
For more information
www.datagate-i.cominfo@datagate-i.com
US Phone: +1 (904) 310 1723 NZ Phone: +64 (9) 280 3626 AU Phone: +61 (2) 9133 8605
Datagate Case Study | Ranch Hills Water Supply Corporation
Laurie Sheranko, right, with her daughters.