SDL Annual Meeting 2021

2021 Annual Meeting Address 27 October 2021
FY2021 Overview
Solution Dynamics (“SDL” or “Company”) produced a year of further earnings and operational
progress in FY2021. It was pleasing to report a record net profit after tax of $2.03m and a record
dividend to shareholders of 11 cents per share (fully imputed).
The Company’s offshore expansion gained traction with US growth the particular standout.
However, COVID constrained our direct sales efforts, especially to the small-to-medium business
(“SMB”) market in North America, and we will review our go to market strategy for the SMB
segment during 2022.
SDL’s software platforms continue to win new business. The post-on-demand (POD) solution allows
customers to route mail correspondence, traditionally handled by companies on an in-house basis,
to the Company’s print partners. The Jupiter platform links a range of customer communication
origin points with SDL’s global network of print production and fulfilment services. There is clear
customer demand for these solutions. SDL has a near-term development programme to improve
integration amongst its various platforms, as well as building additional functionality to facilitate
onboarding and self-serve capability for the SMB market in particular.
Ongoing revenue growth, mostly in North America, is mainly from increasing business from existing
customers plus the geographic rollout of activity with customers such as Pitney Bowes.
SDL maintains a conservative balance sheet with net cash and has only lease-related debt
(predominantly for leases on premises and print equipment). SDL’s net cash position provides
financial capacity for acquisitions, most likely aimed at delivering product or geographic expansion.
The Directors will only proceed cautiously, on the basis that any transaction is expected to be value
adding for shareholders, and with manageable financial and operational risks.
Software & Technology
SDL’s Software & Technology revenue grew to around 70% of total Company revenue in FY2021. In
addition to the traditional legacy software sales approach of licence fee and annual maintenance
revenue (which SDL now has little of), the Company operates two main Software revenue models.
The first is the standard software-as-a-service (“SaaS”) model where SDL earns revenue from
customer volume activity, usually on a charge per-communication for cloud-hosted software. As
these are enterprise contracts there is no single fee structure; some contracts have minimum
charges, while others have sliding scales where the per-communication charge reduces as volumes
move through tiers. The SaaS model has the customer managing its own communications delivery
operations (i.e. print/mail, email, txt).
The other main model is where SDL provides a total communications solution. In addition to the
SaaS platform, this includes service delivery of the communications output which is typically print
and mail, but can also include email and texts. These contracts typically provide a bundled price for
each item of communication and there is no separation of the SaaS and service delivery

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components. For all international customers, SDL uses third party providers (print, logistics,
postage) and consequently, the service delivery component has much lower gross margins than the
SaaS component.
FY2021 Financial Metrics
As the key result metrics table below notes, revenue growth in FY2021 was 4.2%, well below growth
in FY2020 as a result of the more difficult NZ market and the impact internationally of COVID on
some customers and volumes related to developing markets.
The cost of servicing and supporting a geographically diverse range of international customers has
required the Company to build staffing levels over the past several years, and FY2021 saw additional
hires for support, DevOps and implementation. This was partially offset by some staffing changes in
the domestic business late in the year. The current level of staffing now appears sufficient to
support the existing customer base; further cost growth is likely to be largely driven by new
customer activity or any broadening in the range of software solution platforms offered.
Key result metrics ($figures are ’000) FY21 FY20 Growth Y/Y CAGR (5-yr)
Total Revenue 35,445 34,030 4.2% 16.8%
Digital Print & Outsourced 10,810 12,018 -10.1% -1.9%
Software & Technology 24,635 22,012 11.9% 40.8%

Gross Profit 13,491 13,459 0.2% 13.8%
Gross Margin 38.1% 39.6%
SG&A expenses 9,277 9,105 1.9% 11.5%

EBITDA
(a)
4,214 4,354 -3.2% 20.0%
EBITDA Margin 11.9% 12.8%

Net Profit after Tax 2,034 1,866 9.0% 14.9%

Earnings per share (cents) 13.89 12.75 9.0% 14.0%
Dividends per share (cents) 11.00 9.00 22.2% 15.9%

(a) EBITDA (i.e. Earnings before Interest, Taxation, Depreciation, Amortisation and Impairment) is a non-GAAP earnings figure that
equity analysts tend to focus on for comparable company performance analysis. The Company considers that it is a useful
financial indicator because it avoids the distortions caused by the differences in amortisation and impairment policies.

Note that the prior FY2020 result contained two material one-off items that produced a net gain
after tax of $0.23 million. Deducting this from reported earnings produces a normalised profit (note
this is a non-GAAP measure) of $1.63 million for FY2020, which the Directors believe provides a
more accurate picture of how the Company’s underlying operations performed that year.
Cashflow from trading was $2.37 million, broadly similar to the prior year, and the closing net cash
balance was $4.71 million although this contains some prepayment of postage by international
customers (around $1.20 million).

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The Company’s FY2021 dividends totalled 11.0 cents per share (fully imputed), up from 9.0 cents the
prior year. SDL’s policy is to pay dividends at around 70-75% of earnings, subject to no abnormal
internal requirements for unusual capital expenditure items or acquisitions, as well as being able to
fully impute any dividend.
Effects of COVID
SDL continued its COVID-safe practices throughout the year, with temperature checks on all
workplace attendees and use of split production teams. Many of the Company’s staff worked from
home where practical.
The Company estimates that COVID was a drag on revenue of very approximately 10-12% in FY2021,
from ongoing disruption to communication volumes in a range of regions.
COVID has undoubtedly caused the decline in transactional mail volumes to accelerate. The main
effect from this on SDL’s international expansion is to slow the rate of growth we would otherwise
be achieving. In the domestic print and mail business COVID is exacerbating the problem of excess
capacity and some industry rationalisation is needed, although SDL, with a low cost structure, seems
well placed to compete.
Strategy and FY2022 Outlook
SDL reconfirms prior guidance for FY2022 of a reported net profit around $2.5 million. There is some
risk to the New Zealand component of earnings from the ongoing COVID lockdown, however, North
America is performing well.
The Company has channel partnering discussions underway to obtain reach into the SMB segment
and several vertical markets, although these have yet to reach conclusion.
Risks from COVID mean the outlook for the short to medium term still remains volatile. Further
COVID shocks may result in lower than expected customer volumes or customers delaying decisions
and projects. Along with COVID, the possibility of macroeconomic shocks could also cause
significant variation in earnings outcomes for FY2022. The inability of NZ staff to travel offshore
increases execution risk and hampers direct sales efforts.
The CEO, Mr Nelson Siva, is continuing to receive treatment for a medical condition. The Directors
are conscious of ensuring the Company has suitable senior management support and succession
plans in place.
The Directors advise that profit in FY2022 is expected to be biased towards a stronger first half,
which is likely to be around 75% of full year guidance.

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Solution Dynamics Limited
Annual Shareholder Meeting, 27 October 2021
S O L U T I O N
D Y N A M I C S
1

S O L U T I O N
D Y N A M I C S
•Meeting open: Voting and Questions procedure
•FY2021 overview
•Business commentary and key trends
•Effects of COVID
•Strategy and FY2022 Outlook
•Formal business of the meeting, including resolutions:
•to fix Auditor’s remuneration
•to re-elect Julian Beavis
•to re-elect Andy Preece
•General business and Questions
A g e n d a
2

S O L U T I O N
D Y N A M I C S
O n l i n e A t t e n d e e s : V o t i n g P r o c e s s
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S O L U T I O N
D Y N A M I C S
O n l i n e A t t e n d e e s : Q u e s t i o n s P r o c e s s
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S O L U T I O N
D Y N A M I C S
F Y 2 0 2 1 O v e r v i e w
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•FY2021 maintained business and earnings momentum, albeit more slowly than initially expected
•difficult domestic market, with ongoing pricing and margin pressure
•successful international growth: continued US expansion, UK remains partly COVID-affected
•International expansion driven by software platforms:
•Jupiter and Post-on demand (POD) driving success
•SDL provides system and platform interconnectivity for global print and electronic communications
•SDL’s development focus is on increasing integration and interoperability amongst its platforms
•increasing integration with internal IT systems of key customers improves customer “stickiness”
•Cost structure growth slowed; future cost expansion now more new customer/activity driven
•additional resourcing for support, DevOps and implementation was added in FY2021
•Maintain a conservative balance sheet (hold net cash and only lease-related debt) with a careful
approach to considering acquisitions for product or geographic growth

S O L U T I O N
D Y N A M I C S
F Y 2 0 2 1 O v e r v i e w : S o f t w a r e & T e c h n o l o g y
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•Software & Technology revenue now around 70% of total SDL revenue
•SDL’s solutions benefit from the mix of both digital document software processing capability, and
specialized global print and mail industry knowledge
•Software & Technology operates several revenue models:
•standard SaaS (software as a service) for customer communications documents, on a volume based
charge, often with a base monthly fee
•total communications service (IT processing, printing via third party, and mail) for an all-in cost (the
SaaS component is not broken out or charged separately)
•bespoke development solutions around SDL’s core platforms, although usually added as generic
functionality to avoid excess complexity and risk building technical debt
•professional services such as business analysis, communications design services and customer
onboarding
•the total communications service model provides the bulk of the Software & Technology revenue
although gross margins from third party printing, logistics and mail are generally low

S O L U T I O N
D Y N A M I C S
F Y 2 0 2 1 O v e r v i e w : K e y r e s u l t m e t r i c s
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Financial Metrics ($000)FY21FY20GrowthY/YFive-YrCAGR
TotalRevenue35,44534,0304.2%16.8%
Digital Print & Outsourced10,81012,018-10.1%-1.9%
Software & Technology24,63522,01211.9%40.8%
Gross Profit13,49113,4590.2%%13.8%
Gross Margin38.1%39.6%
SG&A expenses9,2779,1051.9%11.5%
EBITDA
(a)
4,2144,354-3.2%20.0%
EBITDA Margin11.9%12.8%
Net Profit after Tax
(b)
2,0341,8669.0%14.9%
Earnings per share (cents)13.8912.759.0%14.0%
Dividends per share (cents)11.009.0022.2%15.9%
(a)EBITDA is a non-GAAP earnings figure that equity analysts tend to focus on for comparable company performance analysis. The Company considers that it is a useful financial indicator because it avoids the
distortions caused by the differences in amortisation and impairment policies.
(b)Note FY20 Net Profit included a net after tax one-off gain of $0.23 million

S O L U T I O N
D Y N A M I C S
F Y 2 0 2 1 O v e r v i e w : L o n g t e r m t r e n d s
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Revenue ($000)
EBITDA ($000) and EBITDA Margin (%)
Net Profit after Tax ($000)Dividends (cents per share, excl Imp Credits)

S O L U T I O N
D Y N A M I C S
O n g o i n g e f f e c t s o f C O V I D
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•Continue to maintain COVID health practisesirrespective of lockdown status
•continued success to date with staff health/safety
•health monitoring ongoing, effective work practises(e.g. split production teams)
•still working from home where possible; productivity maintained
•Estimate COVID had a modestly negative effect on FY2021 profitability
•significant (and ongoing) drop in parts of UK volumes
•some clients with operations in developing countries continue to be disrupted (lower volumes)
•difficulty with direct selling efforts, especially in North America
•SDL estimates a very approximate 10-12% revenue drag in FY2021 from COVID
•COVID accelerating the existing trend of transactional mail volumes towards electronic
•should not affect SDL’s international expansion and growth, albeit it may slow the rate of growth
•increasing pressure on NZ print/mail house market; rationalisationof industry excess capacity needed

S O L U T I O N
D Y N A M I C S
S t r a t e g y a n d F Y 2 0 2 2 O u t l o o k
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•Key strategy is ongoing development of SDL’s international software & technology business
•direct sales model in US affected by COVID, re-focus on outbound sales and channels
•several channel partnering discussions in progress
•significant growth upside available if we execute
•Key risk remains further COVID-related economic shocks or customer timing delays
•Nelson Siva is receiving ongoing medical treatment; the Directors have reviewed senior
management support and succession plans
•Reiterate previous earnings guidance for FY2022 of around $2.5 million
•to date, NZ is slightly behind budget (COVID affected) and North America slightly ahead
•guidance assumes client onboarding proceeds as planned and no additional COVID disruptions
•inability of NZ staff to travel increases operational execution risks
•FY2022 result is likely biased to a stronger first half

S O L U T I O N
D Y N A M I C S
F o r m a l B u s i n e s s o f t h e M e e t i n g : V o t i n g P r o c e d u r e
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•Voting will be by way of poll and though proxy submission
•votes will be counted by Computershare and the results then released on NZX
•you must have logged on to this meeting using the details you received in the Notice of Meeting to be
eligible to vote
•How to vote reminder
•if you are eligible a ‘Vote’ tab will show on your screen; click on the tab icon to vote
•the resolutions will appear along with voting options
•simply select the voting direction from the options shown on the screen
•your vote has been cast when the tick appears
•you can change your vote any time until the meeting ends by selecting ‘Change your vote’.
•Chair of the meeting will verbally advise proxies at this time

S O L U T I O N
D Y N A M I C S
F o r m a l B u s i n e s s o f t h e M e e t i n g : R e s o l u t i o n s
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•Resolution 1: Auditor remuneration
•That the Board be authorisedto fix the remuneration of Grant Thornton as the Company’s auditors
•Resolution 2: Re-election of Julian Beavis
•To re-elect MrJulian Beavis who is retiring by rotation as required by Listing Rule 2.7.1 of the NZX
Listing Rules and in accordance with the Company’s constitution, and being eligible, offers himself for
re-election as a director
•Resolution 3: Re-election of Andy Preece
•To re-elect MrAndy Preecewho for continuity purposes is retiring in advance of the NZX Listing Rules
rotation requirements, and being eligible, offers himself for re-election as a director

S O L U T I O N
D Y N A M I C S
G e n e r a l b u s i n e s s a n d Q u e s t i o n s
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•Any remaining general business or questions from shareholders?
•Meeting formally closes
Thank you for attending