2019 ANNUAL REPORT SUPERLOOP LIMITED | ABN 96 169 263 094 superloop.com 2019 ANNUAL REPORT _____ Table of Contents Chairman & CEO Report 4 FY19 Business Overview 10 Directors’ Report 13 Remuneration Report 26 Auditor’s Independence Declaration 38 Financial Report 39 Notes to the Consolidated Financial Report 44 Directors’ Declaration 81 Independent Auditor’s Report 82 ASX Additional Information 87 2 SUPERLOOP LIMITED AND CONTROLLED ENTITIES ANNUAL REPORT FY19 3 Chairman & CEO Report On behalf of the Board of Directors of Superloop Limited, it is our FY20 Operational Highlights pleasure to present the Annual Report for the 12 months ended 30 June 2019 (FY19). Superloop was founded to change the way that Asia Pacific connects, identifying in 2014 that legacy incumbent networks around the region were designed before the advent of the cloud, therefore creating an opportunity for a brand new purpose- built network and organisation to meet the growing demand Completed Asia Pacific On-Net Buildings Award-winning network for high capacity, low latency, connectivity across the region. core network loop Best Telco Innovation 392 Best Fixed Wireless Provider This was your Company’s fourth full financial year since listing, INDIGO & AU backbone +26% YoY Best Virtual Network Operator and arguably its most momentous and eventful year so far. 2019 saw the completion of the two final pieces of our pan-Asia Pacific core network ‘loop’. This was also a year of significant corporate activity including a capital raise, a debt facility extension, due diligence from a non-binding indicative offer, as well as restructuring and refocusing the company on our core assets. Traffic on Network Re-launched portfolio Integrated teams +1900% All products operating under Unified ~300-strong On FY16 Superloop brand organisation Company Highlights Founded in 2014 to connect Asia Pacific to the cloud, with a legacy-free network capable of fulfilling Delivery of these core network projects has been capital intensive. We are nearing the end of this investment in our future the growth in demand for bandwidth and are well positioned to monetise these assets to deliver long-term shareholder value. We are already seeing the benefit of these investments with a strong sales pipeline, network traffic increasing 1900% on FY16 levels and receipt of several awards related to the innovative nature and overall quality of our networks. Invested $256m in advanced fibre networks connecting bandwidth-intensive properties across Asia Pacific, on average 2 years into 20+ year useful life Superloop is well positioned for future value creation Superloop also distributes connectivity within campuses smartly and securely, leveraging $210m of Nearing the end of a major capital Significant new sales opportunities on our investments in adjacent platforms through acquisitions investment program owned core fibre connectivity business on a strong growth trajectory Net book value of assets $1.37 per share at 30th June 2019; $346m net assets post $50.7m Our on-net footprint in Australia and Asia Superloop is now well positioned to continue impairment of non-core services segment Pacific is positioned to take advantage of the to deliver significant growth to deliver burgeoning demand for connectivity and on long-term customer and shareholder broadband expectations Core fibre connectivity(1) revenues up 89% year-on-year (YoY), with sales expected to ramp up now core Asia Pacific loop is live and connected FY19 is the year that Superloop completed building the foundations on which it must now build. To be able to deliver all of the above cornerstone projects, while facing many significant growth challenges, is testament to the quality and FY19 EBITDA of $8.5m & reconfirming FY20 $14m-$16m guidance, excluding other one-off commitment of Superloop’s outstanding people. We would like to thank all of the Superloop team for the effort they’ve put transactions that may occur in over the last year. On behalf of the Board and Management, we would like to thank you for your continued support. With core network now in place, the marginal incremental investment required to win new customers represents the majority of the future capital needs of Superloop(2) (1)Core Fibre Connectivity Revenues excluding INDIGO development revenue, includes installation revenues, IRU revenue (AASB15) and Michael Malone Drew Kelton domestic construction revenue Chairman Chief Executive Officer (2)In the absence of any major new infrastructure opportunities arising Superloop Limited Superloop Limited 4 SUPERLOOP LIMITED AND CONTROLLED ENTITIES ANNUAL REPORT FY19 5 “At Superloop we believe we have built the only network that can deliver a seamless cloud-first experience to the major traffic hubs and enterprise buildings in Asia Pacific.” Drew Kelton Chief Executive Officer 6 SUPERLOOP LIMITED AND CONTROLLED ENTITIES ANNUAL REPORT FY19 7 “Over the next 2 years I believe the ‘clouds’ will be coming out of the data centre and directly to where we live, work and play. In a cloud world the ‘last mile’ is now becoming the ‘first mile’ of connection.” Bevan Slattery Founder - Superloop, Megaport, NEXTDC, PIPE Networks 8 SUPERLOOP LIMITED AND CONTROLLED ENTITIES ANNUAL REPORT FY19 9 SAN JOSE JAPAN LOS ANGELES FY19 Business Overview HONG KONG SINGAPORE DARWIN BRISBANE PERTH Asia Pacific Fibre Network ADELAIDE SYDNEY FIBRE NETWORK CANBERRA AUCKLAND MELBOURNE INDIGO West HOBART INDIGO Central Fibre Superloop’s Portfolio Connecting Asia Pacific Asia Pacific Platforms Leveraging 1 2 3 Non-Core CMS Core Fibre Network Fibre Network Fibre networks connecting Fixed Wireless (Connectivity) Cloud Managed Services providing key hubs in Singapore, Australia Guest WiFi (Broadband) hosted IT & equipment procurement and Hong Kong and INDIGO Home Broadband (NBN & FW) to small businesses subsea cable CyberHound Security (Services) Australia Singapore Hong Kong 89% 11% 31% 30 June 2019 30 June 2018 30 June 2019 30 June 2018 30 June 2019 30 June 2018 Revenue YoY Revenue YoY Revenue YoY 430km 242km 216km 190km 248km 239km Core Fibre Connectivity Revenues Total Annual Revenue Revenue Mix % excl. subsea dev. Fibre Fibre Fibre Fibre Fibre Fibre $35.2m $3.1 301 225 59 57 32 28 $61m Strategic Sites Strategic Sites Strategic Sites Strategic Sites Strategic Sites Strategic Sites $55m $21 $21.8 $18.6m $22m $1.3 $12.3m $19 $0.1 $23m $11.3 $19 Superloop Owned Optic $7.6m $13 $9.4 $17 38% 26% Fibre Build Progression $10.3 $7 Legacy Legacy 16% $7.6m $7 $6.0 Legacy $0.0 $2.9 $0.0 $0.0 $3 $6 $5 FY15 FY16 FY17 FY18 FY19 FY15 FY16 FY17 FY18 FY19 H2 FY17 H2 FY18 H2 FY19 184km 378km 614km 671km 894km 33.2% Hong Kong Australia Fixed Wireless Guest WiFi Core Fibre Connectivity June 2015 June 2016 June 2017 June 2018 June 2019 From 30 June 2018 Singapore Home Broadband Cybersecurity Fixed Wireless, Broadband & CyberHound Legacy CMS being discontinued $256m $214m $(50.7)m Connected Strategic Sites Invested capital to date in core Carrying Value of Non Current Impairment to $6m Carrying Value As of 30 June 2019 26.5% 392 From 30 June 2018 connectivity networks including IRUs. Assets excluding Fibre Connectivity of Services segment. & Services segments. 10 SUPERLOOP LIMITED AND CONTROLLED ENTITIES ANNUAL REPORT FY19 11 Directors’ Report “Network coverage across the Asia Pacific region, combined with the INDIGO subsea cable system, together with a standardised and scalable suite of connectivity solutions including broadband and cybersecurity, will provide trusted and reliable services to a broad range of customer segments.” 12 SUPERLOOP LIMITED AND CONTROLLED ENTITIES ANNUAL REPORT FY19 13 COMPLETE CONNECTIVITY Directors’ Report PLATFORM FOR ASIA PACIFIC The Directors present their report on the consolidated (Guest WiFi and Home Broadband) and Services entity (referred to hereafter as ‘Superloop’, ‘the Group’ (cybersecurity under the CyberHound product brand, 4 or ‘the Company’) consisting of Superloop Limited and and Cloud Managed Services). 2 the entities it controlled at the end of, or during, the year ended 30 June 2019. In order to deliver Connectivity, Broadband and Services 3 to customers within Asia Pacific, the Group’s process value DIRECTORS chain and organisational structure encompasses: • Developing strategy and capital requirements; The following persons were Directors of the Group during the year: • Building the core network ‘loop’ connecting bandwidth- intensive properties in Singapore, Australia and Hong 5 Michael Malone (Chairman) Kong including a subsea cable network; Bevan Slattery • Marketing and selling to a range of wholesale, enterprise Greg Baynton and residential customers under a single Superloop brand; 6 Richard (Tony) Clark Vivian Stewart • Delivering products & services to customers in an efficient Louise Bolger (resigned: 23 November 2018) and effective manner; Jason Ashton (resigned: 30 September 2018) • Operating and maintaining the networks and services to Matthew Hollis (resigned: 23 November 2018) high quality service levels; 1 Alexander (Drew) Kelton (appointed: 23 November 2018) • Enabling its core value chain by providing people & culture, legal & governance, finance, technology and PRINCIPAL ACTIVITIES security support. The principal activities of the Group include: FY19 Operational Highlights include: • The construction and operation of independent • Completing the Asia Pacific core network loop including telecommunications infrastructure throughout the Asia INDIGO subsea cable from Singapore to Perth to Sydney, Pacific region, including