SDL 2024 Annual Shareholder Meeting

Solution Dynamics Limited
Annual Shareholder Meeting, 24 October 2024

Important Information and Disclaimer
This presentation has been prepared by Solution Dynamics Limited (SDL) for informational purposes. This disclaimer applies to this document and the verbal or
written comments of any person presenting it. This presentation dated 24 October 2024 should be read in conjunction with, and subject to, the explanations
and views of future outlook on market conditions, earnings and activities given in the FY2024 Annual Report (together with management commentary)
published on 22 August 2024.
In parts of this presentation, SDL has presented certain financial information exclusive of the impact of significant items. A number of non-GAAP financial
measures are used in this presentation which are used by management to assess the performance of the business and have been derived from SDL’s financial
statements for the 12 months ended 30 June 2023. You should not consider any of these statements in isolation from, or as a substitute for the information
provided in the financial statements for the 12 months ended 30 June 2024.
The information in this presentation has been prepared by SDL with due care and attention, however, neither SDL nor any of its directors, employees,
shareholders, nor any other person gives any representations or warranties (either express or implied) as to the accuracy or completeness of the information
and to the maximum extent permitted by law, no such person shall have any liability whatsoever to any person for any loss (including, without limitation, arising
from any fault or negligence) arising from this presentation or any information supplied in connection with it.
This presentation may contain forward-looking statements, that is statements related to future, not past, events or other matters. Forward-looking statements
may include statements regarding our intent, belief or current expectations in connection with our future operating or financial performance, or market
conditions. Such forward-looking statements are based on current expectations, estimates and assumptions and are subject to a number of risks and
uncertainties, including material adverse events, significant one-off expenses and other unforeseeable circumstances. There is no assurance that results
contemplated in any of these projections and forward looking statements will be realised. Actual results may differ materially from those projected. Except as
required by law, or the NZX Listing Rules, no person is under any obligation to update this presentation at any time after its release or to provide further
information about SDL
.
The information in this presentation does not constitute financial product, legal, financial, investment, tax or any other advice or a recommendation.
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Agenda
•Meeting open: Voting and Questions procedure
•FY2024 overview
•FY2024 key result metrics
•Business strategy and building AI in SDL’s platform:
•Vertical market focus
•Go-to-market strategy
•Software & Technology strategy
•FY2025 Outlook
•Formal business of the meeting, including resolutions:
•to re-elect Andy Preece
•to re-elect Julian Beavis
•to fix Auditor’s remuneration
•General business and Questions
3

•Once the voting has been opened, the
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Online Attendees: Voting Process
4

Online Attendees: Questions Process
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FY2024 Overview
•Delivered second highest ever net profit after tax
•despite difficult market conditions (inflation, slow economic conditions, tough global postage market)
•Differing NZ and International performance
•strong market share gains contributed to growth in NZ, albeit restrained by declining postal volumes
•international affected by weak mortgage market and timing of an order slipping into FY2025
•Cost control aided by soft labour market
•restructured several areas and upgraded system to boost efficiency and productivity
•No further RFP update
•no formal communication in recent months, SDL continues to be awarded customer’s work
•Conservative balance sheet ($8.0 million, ~54cps) with a cautious approach to acquisitions
•intention to review capital structure in 2025 (subject to no acquisition or major capex)
•consider all options to enhance shareholder returns
6

FY2024 Overview: Key result metrics
Financial Metrics ($000)FY24FY23Growth Y/YFive-Yr CAGR
To t a l Revenue38,66840,553-4.6%9.0%
Digital Print & Outsourced13,17511,95910.2%-4.2%
Software & Technology25,07728,485-12.0%24.6%
Gross Profit14,84416,154-8.1%11.8%
Gross Margin38.4%39.6%
SG&A expenses10,00910,442-4.1%10.1%
EBITDA
(a)
4,8355,712-15.4%15.8%
EBITDA Margin12.5%14.1%
Net Profit after Tax2,8193,425-17.7%39.9%
Earnings per share (cents)19.223.3-17.6%39.7%
Dividends per share (cents)9.511.5-17.4%18.9%
(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.
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Digital First Business Strategy
•Sales activity leading with Digital First transformation
•Unified software products into a Digital Mail Centre (DMC) platform
•Omni-channel cloud solution connected to global digital
workflow/network
•Solutions running as an integrated and configured platform
•Added improved workflow solutions
•Integrating digital channels with print to deliver “omni-
channel”
•One client portal to access range of SDL software solutions
•Intelligent QR code integration to personalize content
•Adding AI, with the initial focus on language translation
8

Acceleration
Composition
Images
Creative Options
Digitization
Language Translation
Analytics
Insights/Actions
Customer Experience (CX)
Automated Chat Support
Next Best Action
Self Service
AI Powered Customer Communications
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Language Accessibility ripe for Digitisation
New Zealand
•English a first language: NZ 85%, Auckland 69%
•15% of Aucklanders originate from Pacific Islands
•28% from Asia mostly Indians and Chinese
•for many, written English is secondary format
United States
Accessibility of communications (ADA- Americans with Disabilities
Act) includes language translation for people with Limited English
Proficiency
AI translation software digitises the manual translation process
•software generates final draft for human review
•eliminates human translation costs over 10 cents a word
•human QA for final review to ensure quality/context
US Medicare provider saved $4m (80%) and accelerated process
from weeks to minutes
10

Well positioned to leverage AI
•Excited by AI opportunity to reinvent SDL value
•SDL is new to this space but well positioned
•Breadth of software platform/know how
•Experience managing difficult legacy applications
•Experience managing translations
•AI will quickly become “table stakes” in CCM
•Accelerate market consolidation/new players
•Force mail service providers to add AI software
•There may be “first mover” advantages
•Business impact is difficult to predict as this point
•Investment ramp
•Customer adoption rate
•Competitive response
•Moving quickly to launch, learn, and iterate
11

Non-binding Indicative Offer (NBIO)
•NBIO received on 8 September 2024 from NZX-listed Being AI (BAI)
•NBIO noted any potential takeover offer could involve:
•either a full or partial takeover
•offer to comprise either (a) cash plus BAI shares (proportions not stated) or, (b) all BAI shares
•No option was provided for a full takeover for all cash
•Directors (with advice) viewed the NBIO as incomplete and highly conditional
•no enough detail to form an opinion that proposed transaction was in the interest of SDL shareholders
•BAI request for due diligence was declined
•Partial takeover offer may not provide SDL shareholders with opportunity to exit all their shares
•No further communication has been received from BAI since the NBIO
12

FY2025 Outlook
•Solid momentum in NZ new business (print and mail overall market declines continue)
•Driving international growth remains the top priority
•restructured North American sales and investing in additional local US sales and marketing
•direct sales still targeting key vertical markets such as global charities and specific domains
•Enterprise sales opportunities for GenComm AI language translation
•will require additional sales and pre-sales resource to execute as product/market fit proved out
•enterprise sales cycles usually 6-12 months, so little meaningful revenue likely before FY2026
•Board remains conscious of recent share price move and broader problem of small cap illiquidity
•Key risks remain global macroeconomic slowdown and accelerating move from physical mail
•Providing H1 FY2025 earnings guidance in range of $2.2 to $2.6 million (H1 FY2024: $2.5 million)
•first quarter around expectations and marginally ahead of prior year
•no full year FY2025 guidance until largest customer RFP outcome is known (H1 FY2024 not affected)
13

Question time
Questions?
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Formal Business of the Meeting: Voting Procedure
•Voting will be by way of poll
•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’.
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Formal Business of the Meeting: Resolutions
•Resolution 1: Re-election of Andy Preece
•To r e-elect Andrew Preece as a director of Solution Dynamics Limited
•Resolution 2: Re-election of Julian Beavis
•To r e-elect Julian Beavis as a director of Solution Dynamics Limited
•Resolution 3: Auditor remuneration
•That the Board be authorised to fix the remuneration of the Company’s auditors for the FY2025 year
16

General business and Questions
•Any remaining general business or questions from shareholders?
•Meeting formally closes
Thank you for attending
17

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Postal Address
Solution Dynamics Limited

PO Box 301248, Albany
Auckland 0752, New Zealand

Physical Address
18 Canaveral Drive

Albany
Auckland 0632

Contact
Phone: +64 9 970 7700

Email: info@solutiondynamics.com
Web: www.solutiondynamics.com

2024 Annual Meeting Address 24 October 2024

FY2024 Overview
The past financial year saw Solution Dynamics (“SDL” or “Company”) navigate challenges
that included a difficult macroeconomic environment globally, postal market pressures, and
the Company’s largest customer issuing an RFP covering services provided by SDL. Despite
these headwinds, the Company produced its second highest ever net profit result of $2.8
million, testimony and thanks to the efforts of all staff across the group.
The Company’s revenue declined slightly, down 4.6% to $38.7 million. SDL’s New Zealand
operations made significant progress, gaining share in a declining local print and mail
market and continuing to pick up new work from a range of local councils and commercial
contracts. These wins continue the strong sales progress from FY2023 and will provide
assistance as the new customers contribute more fully in FY2025 in addition to further new
business gains.
International operations generated only modest new business, with SDL placing significant
focus on key existing client retention. Ongoing weakness from the US mortgage market, the
result of high interest rates, continued to negatively impact results, along with the timing of
a large order around year end that moved into FY2025, plus somewhat lower customer
volumes from the weakening global economy. These factors combined to result in a 12.0%
reduction SDL’s Software & Technology revenue to $25.1 million.
The RFP process from the Company’s largest customer remains ongoing, albeit with no
formal communication received in recent months. During FY2024, SDL implemented a
global distributed print and distribution model that enabled material cost savings for the
customer. SDL continues to be awarded ongoing work based around the customer’s usual
communications programmes.
Labour market cost pressure from COVID progressively abated over FY2024 and the general
labour market now appears quite soft. Several areas of operation were targeted for
restructuring during the year, aimed at improving efficiency and productivity. In the short
run, this incurred costs along with a lag while new staff came up to speed with SDL’s
systems and processes.
SDL closed the year with net cash on hand at $7.95 million (approximately 54 cents per
share). The Directors continue to maintain a preference for acquisition opportunities, most
likely aimed at delivering product or geographic expansion and remain conscious that any
transaction must add value shareholders, with manageable financial and operational risks.
SDL’s International Growth Fund co-funding grant from NZ Trade & Enterprise from late H1
FY2023 continued to operate during FY2024. It runs for three years (to late calendar 2025)
and reimburses 50% of US market development costs to a maximum of $0.6 million.

Postal Address
Solution Dynamics Limited

PO Box 301248, Albany
Auckland 0752, New Zealand

Physical Address
18 Canaveral Drive

Albany
Auckland 0632

Contact
Phone: +64 9 970 7700

Email: info@solutiondynamics.com
Web: www.solutiondynamics.com

A constraint of the grant is that SDL distributions (dividends and any capital returns) are
capped at 50% for the term of the agreement.
The Directors are very aware that the NZTE constraint has restricted shareholder payouts
and – subject to no capex or acquisition requirements – intend to review SDL’s capital
structure during 2025 and consider all options to enhance shareholder returns.

Postal Address
Solution Dynamics Limited

PO Box 301248, Albany
Auckland 0752, New Zealand

Physical Address
18 Canaveral Drive

Albany
Auckland 0632

Contact
Phone: +64 9 970 7700

Email: info@solutiondynamics.com
Web: www.solutiondynamics.com

FY2024 Financial Results
Despite the economic and postal market headwinds, SDL generated its second highest ever
net profit after tax of $2.8 million, down 18%, with dividends to shareholders totalling 9.5
cents per share (fully imputed).

Key result metrics ($figures are ’000) FY24 FY23 Growth Y/Y CAGR
(5 -yr)
Total Revenue 38,668 40,553 -4.6% 9.0%
Digital Print & Outsourced 13,175 11,959 10.2% -4.2%
Software & Technology 25,077 28,485 -12.0% 24.6%

Gross Profit 14,844 16,154 -8.1% 11.8%
Gross Margin 38.4% 39.6%
SG&A expenses 10,009 10,442 -4.1% 10.1%

EBITDA
(a)
4,835 5,712 -15.4% 15.8%
EBITDA Margin 12.5% 14.1%

Net Profit after Tax 2,819 3,425 -17.7% 39.9%

Earnings per share (cents) 19.15 23.27 -17.6% 39.7%
Dividends per share (cents) 9.50 11.50 -17.4% 18.9%

(a) EBITDA (i.e. Earnings before Interest, Taxation, Depreciation, Amortisation and Impairment) is a non-GAAP earnings
figure that equity analysts may 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 capital structure,
amortisation and impairment policies.

The Company’s revenue declined 4.6% to $38.7 million. While some cost pressures
continued, SDL was able to manage staffing levels and implement a modest price increase
across its New Zealand customer base. SG&A costs were tightly managed during the year.
SDL upgraded several internal systems during the year, including finalisation of new
accounting/ERP and CRM systems, and largely concluding the implementation of a new
print job management system. These should provide improved operating and sales
efficiencies.
We commented last year that success never runs in a straight line. Ongoing pressure in
postal markets general, coupled with macroeconomic headwinds mean the Company
continues to have its work cut out to generate growth. The entire company is aligned to
deliver results with both staff changes and product development supporting growth
initiatives.

Postal Address
Solution Dynamics Limited

PO Box 301248, Albany
Auckland 0752, New Zealand

Physical Address
18 Canaveral Drive

Albany
Auckland 0632

Contact
Phone: +64 9 970 7700

Email: info@solutiondynamics.com
Web: www.solutiondynamics.com


Business Strategy Evolution and Building AI into SDL’s Platform
SDL aims to continue its transformation into a global business through enabling global
customer communications as a service, to unlock significant customer cost savings while
improving client engagement. This global strategy focuses on key verticals with large-scale,
global communications needs such as global charities like World Vision and global CCM
platform providers such as Pitney Bowes.

Global customer communications technology delivered as a managed service is at the heart
of what SDL does. SDL has largely unified it software products into a “Platform” called DMC
(Digital Mail Centre) which leverages a digital workflow approach to ensure the right
message gets delivered through the right channel and from the right location. This provides
customers with an end-to-end solution covering digital and printed communications
through one platform DMC allows SDL’s sales efforts to lead with “digital transformation”
and mobile first communications which continues to assist with new business wins.
Leading with digital transformation is not just an international strategy but a key
differentiator in the New Zealand market. The traditional print and mail house market is
expected to continue its structural decline and likely to consolidate (or participants may
exit) so it was particularly pleasing to see the New Zealand business generate growth in a
shrinking market. The focus on new business, driven by new talent and leading with “digital
transformation” has paid off and continues to progress. SDL’s software business and strong
financial position means the Company is well positioned in the NZ market as a supplier of
choice.
During the second half of FY2024, SDL began enhancing its digital solutions by integrating
artificial intelligence (AI) into its customer communications platform. The emerging
landscape for AI powered customer communications solutions is attractive but very broad.
The best product/market fit for SDL initially is in the language translation space, given the
needs of our government and global charities customers. We recently launched GenComm
AI™, an AI-powered global customer communications cloud and managed services offering,
that integrates “best of breed” AI solutions with SDL’s powerful cloud platform. This enables
governments, charities, and businesses to quickly, efficiently, and effectively communicate
with citizens, sponsors, and customers in their preferred languages.
Governments at all levels face increasing pressure to ensure communications are accessible
to constituents with Limited English Proficiency (LEP). Beyond regulatory compliance,
communicating with customers in their preferred language can reduce the cost of delays in
payment, follow-up notices, and call center support. Global charities need to quickly
communicate with supporters in many different languages which causes significant delays
and expense. Increasingly, organisations recognise language accessibility as a customer
experience (CX) initiative. GenComm AI™ makes it easy for organisations to connect with
their customers in their preferred language, while reducing the typical cost of manual
translations by up to 80%.

Postal Address
Solution Dynamics Limited

PO Box 301248, Albany
Auckland 0752, New Zealand

Physical Address
18 Canaveral Drive

Albany
Auckland 0632

Contact
Phone: +64 9 970 7700

Email: info@solutiondynamics.com
Web: www.solutiondynamics.com

AI represents an exciting new chapter in the transformation of SDL to a modern global
software technology and managed services business. Digitising the language translation
process is a new space for the Company but plays to SDL’s strengths in managing data,
documents, and complex managed services projects at scale. AI will quickly become table
stakes in customer communications software. There may be first mover advantages but this
will likely drive further consolidation in the industry. Our customers, employees, and
investors will view us as a more modern software technology provider pivoting to growth
markets. The business impact is difficult to predict at this point although our business
position is strong and we are moving quickly to launch, learn, and iterate.

NBIO (Non-binding indicative offer) Approach
Post FY2024 balance date, on 8 September, SDL received an NBIO from a subsidiary of NZX-
listed Being AI Limited (BAI).

The Directors reviewed the terms of the proposed transaction outlined in the NBIO which
was described as involving:
• either a partial or full takeover by BAI, and
• options for SDL shareholders to either take a combination of cash and BAI shares
(relative proportions of cash and BAI shares were not specified) or all BAI shares.
The description of the proposed transaction indicated that there would not be an option for
SDL shareholders to exit their entire holdings in SDL for cash consideration only, nor did it
provide any indication of BAI’s future intentions for SDL should it obtain a controlling
interest without full takeover.
The NBIO remains an incomplete proposal and can only be seen as highly conditional. In the
absence of sufficient detail to form an opinion that the proposed transaction was in the best
interests of all SDL shareholders, the Board declined BAI’s request for access to confidential
due diligence information.
SDL further noted that any partial takeover offer proposal would likely face the hurdle that
it would neither provide all of SDL’s shareholders with the opportunity to exit their holdings
nor any certainty as to the exact proportion of their holdings that may be able to be sold if
any such partial takeover offer proceeded and was successful (because of the likelihood of
scaling).
BAI stated that further detail will be provided in the event that a formal takeover notice is
provided to SDL. No further communication or takeover offer has been received from BAI
since the initial approach. SDL’s Directors will consider and respond to any further approach
or formal takeover offer in accordance with their directors’ duties and obligations under the
Takeovers Code.

Postal Address
Solution Dynamics Limited

PO Box 301248, Albany
Auckland 0752, New Zealand

Physical Address
18 Canaveral Drive

Albany
Auckland 0632

Contact
Phone: +64 9 970 7700

Email: info@solutiondynamics.com
Web: www.solutiondynamics.com

FY2025 Outlook
The new business momentum in New Zealand from FY2024 should see SDL deliver
additional domestic revenue in FY2025, albeit the overall decline in print and mail house
activity continues unabated. Driving growth beyond New Zealand remains the top priority
and GenComm AI provides new differentiating capabilities. The Company recently
restructured its sales staff in North America and is investing in local sales and marketing that
can better leverage GenComm AI growth opportunities. SDL is in the process of folding in
the staff of a Direct Marketing Services company based in the New York City area to provide
enhanced local sales and marketing for GenComm. An experienced Enterprise sales
executive has been hired in Australia and software presales resources will be added in the
US and Australia. The Company will continue to add sales resources as we prove GenComm
AI product/market fit. While SDL is investing in sales enablement during FY2025, enterprise
sales cycles can typically take at least 6-12 months, so little meaningful revenue impact from
GenComm AI is likely until FY2026.

As previously advised, SDL remains unable to provide full year FY2025 earnings guidance
while the outcome of the RFP from its largest customer remains outstanding.
For the first quarter of FY2025, SDL has trading broadly in line with internal expectations
and marginally ahead of the prior year. Forward orders suggest the first half FY2025 result
is now expected to be largely unaffected by the RFP tender and the Company expects
earnings in the range of $2.2 to $2.6 million.
In addition to the large-customer specific risk, SDL cautions that significant volatility in
results is possible and a number of factors, especially macroeconomic headwinds and
material postal market declines, are outside the Company’s control.