Date Theme Sector

29 August 2022 Financial Result Information Technology

Company

Etherstack PLC (ESK)

Big, Quality Wins Will Build on Solid Base

Recommendation OVERWEIGHT
12-mth target price (AUD) $0.70
Share price @ 26-Aug-22 (AUD) $0.47
Etherstack’s (“ESK”) 1H22 result was slightly below our revenue forecasts, but a higher gross Forecast 12-mth capital return 49.7%
margin saw gross profit meet our expectations. While no major new contracts were awarded in Forecast 12-mth dividend yield 0.0%
1H22, ESK has continued to penetrate its existing and traditional Land Mobile Radio (“LMR”) 12-mth total shareholder return 49.7%
customer base which continues to build a solid base of recurring revenue, specifically, support
revenues. ESK remains confident that its Samsung relationship will continue to evolve and result
Market cap ($m) 42.3
in material contract wins over the medium term. The key catalyst remains material contract wins,
Enterprise value ($m) 39.9
with Samsung or more like today’s Nokia announcement. We are forecasting only one in FY22e.
We remain positive on ESK and while we are sensitive to the vagaries of closing large contracts Shares on issue (m) 130.7
in a timely manner, we see this as paramount for a meaningful re-rate in ESK’s share price. ASX All Ords weight (%) 0.0
Median turnover/day ($m) 0.0
 Key Points

Key Result Insights: Revenue came in at US$4.9m which was -14% below our forecast, but Ross Barrows
+13% vs. pcp. Segmentally: Project Revenues grew +29% to $3.8m (WILSe: $4.4m), Support ross.barrows@wilsonsadvisory.com.au
Revenue fell -7% to $927k (WILSe: $895k) and Royalty Revenue was $115k (-69% vs pcp). Tel. +61 3 9640 3854
Gross Profit of US$3.8m grew +14% and was in-line with our forecast, but only due to the Gross
Margin of 77% outpacing our 67% forecast (pcp: 76%). EBITDA of ~US$2.2m was up +53% vs. Cameron Halkett
pcp (and +12% above our $2.0m forecast) reflecting an EBITDA margin of 46%, well above our cameron.halkett@wilsonsadvisory.com.au
35% forecast and the 34% in the pcp. NPAT of $1.7m was +28% above our forecast of US$1.3m Tel. +61 2 8247 3162
and just over double the pcp (US$0.8m) on the back of a pre-tax benefit of US$0.8m due to FX.
Lachlan Woods
Samsung Insights: ESK said it expects “to announce a second telco carrier win via Samsung in the
lachlan.woods@wilsonsadvisory.com.au
second half of 2022”. This is in line with our estimates for 1 Samsung contract win at US$2m in
FY22 (original guidance: 2-4 FY22 contract wins, US$2m-US$8m range). Tel. +61 3 9640 3818

Nokia Announcement: Today announced an A$755k (~US$0.5m) pilot contract with Nokia
Australia which would all fall in 2H22 and could be ~10% of our 2H22e forecast. More
12-mth price performance ($)
importantly is EKS’s traction with another leading global telco, with the pilot cost an encouraging
sign for what a successful pilot program could translate into for ESK. 0.65

Guidance and Outlook: ESK still provided no guidance. This is understandable given the large 0.58
nature of some of its contracts, which are variable in terms of size and timing, making providing 0.52
specific guidance challenging. ESK did state, though, that they expect “additional support
0.45
agreements and support revenue to commence in 2H22e”. They also stated of the A$1.8m deal
they won with Samsung that there is “further orders for 2H22 of A$650k and further 0.38

opportunities in progress”. 0.32

Forecasts, Target Price and Valuation: In light of today’s results, we have reduced our top-line 0.25
Aug-21 Dec-21 Apr-22 Aug-22
forecasts by ~$1m across FY22e-FY24e to reflect the ~$0.5m miss to our 1H22 estimates and
ESK XAO
uncertainty in ESK’s royalty revenue. Despite this we maintain our Overweight recommendation
given the attractive industry dynamics, ESK’s technical lead in the industry and the opportunities 1-mth 6-mth 12-mth
that could arise given the implicit and explicit validation of ESK value proposition following the
Abs return (%) 37.3 31.7 (24.8)
Samsung contract. Our target price reduced by -7% to $0.70 given our lower EBITDA estimates
Rel return (%) 31.8 36.4 (16.0)
and movements in market multiples since when we last published.

Financial summary (Y/E Dec, USD) FY20A FY21A FY22E FY23E FY24E Key changes 17-Feb After Var %
Sales growth (%) (1.9) 81.0 21.1 47.8 29.9 Sales FY22E 11.8 10.3 -13%
Consensus EBITDA ($m) 4.4 6.5 8.7 ($m) FY23E 16.7 15.2 -9%
EBITDA growth (%) (1.2) 141.8 54.5 50.8 35.9 FY24E 21.3 19.8 -7%
NPAT growth (%) (107.5) n/m 69.7 84.9 47.4 EBITDA FY22E 4.4 4.0 -8%
EV/Sales (x) 8.3 4.7 3.9 2.3 1.4 norm FY23E 6.5 6.1 -6%
EV/EBITDA (x) 36.3 15.3 9.9 5.7 3.4 ($m) FY24E 8.7 8.3 -5%
P/E (x) n/m 28.8 17.1 9.2 6.3 Price target 0.75 0.70 -7%
Rating O/W O/W
Source: Company data, Wilsons estimate, Refinitiv.
All amounts are in US Dollar ($) unless otherwise stated.

Wilsons Equity Research

Analyst(s) who owns shares in the Company: n/a Issued by Wilsons Advisory and Stockbroking Limited (Wilsons) ABN 68 010 529 665 – Australian Financial Services
Licence No 238375, a participant of ASX Group and should be read in conjunction with the disclosures and disclaimer in this report. Important disclosures regarding companies
that are subject of this report and an explanation of recommendations can be found at the end of this document.
29 August 2022 Information Technology
Etherstack PLC

 Business Description  Investment Thesis

Founded and based in Sydney, Etherstack listed on the ASX in 2012 and
has established itself as a wireless technology company serving public
safety, electric utility, resource and defence sectors across the globe.
Specifically, Etherstack develops and licenses wireless technologies to
other equipment vendors as well as design, manufacture and deliver
their own innovative digital radio communications products and
networks.
Etherstack’s core Land Mobile Radio (”LMR”) technology is being
leveraged primarily into the Cellular Networks and Satellite segments,
with LTE opportunities in 4G and 5G a key growth driver over both the
short and medium term. Etherstack started its teaming agreement with
Samsung in June 2020 and is starting to yield fruits from that agreement.
We are also attracted to expected momentum from both a regulatory
and government infrastructure investment lens.

 Catalysts
i) LMR – new contract wins and further penetration of existing customers
(eg. Royal Canadian Mounted Police); ii) Cellular – Ongoing contract wins
with its partner Samsung and in FY22e with other telecommunication
partners.
 Risks
i) Dependence on Key Contracts & Relationships; ii) Impacts from
Covid-19; iii) Changes in technology (technological obsolescence);
iv) FX Volatility; v) Illiquidity in share trading.

P&L ($m) FY20A FY21A FY22E FY23E FY24E Balance sheet ($m) FY20A FY21A FY22E FY23E FY24E
Sales 4.7 8.5 10.3 15.2 19.8 Cash & equivalents 4.2 3.0 2.9 8.4 14.9
EBITDA norm 1.1 2.6 4.0 6.1 8.3 Current receivables 1.4 2.4 5.2 6.4 8.4
EBIT norm (0.3) 1.2 2.3 4.0 5.8 Current inventory 0.3 0.3 0.4 0.7 0.9
PBT norm (0.3) 1.1 2.1 3.8 5.6 PPE 0.1 0.6 0.6 0.5 0.4
NPAT norm 0.1 1.5 2.5 4.6 6.8 Intangibles 3.5 5.4 7.0 8.6 10.1
NPAT reported (2.3) 1.5 1.0 4.6 6.8 Other assets 0.6 0.8 0.7 0.7 0.7
EPS norm (cents) 0.1 1.1 1.9 3.5 5.2 Total assets 10.1 12.6 16.8 25.2 35.3
DPS (cents) 0.0 0.0 0.0 0.0 0.0 Current payables 2.8 2.6 3.3 5.0 6.5
Total debt 1.1 0.6 0.5 0.5 0.5
Growth (%) FY20A FY21A FY22E FY23E FY24E Other liabilities 2.2 2.8 4.2 6.3 8.1
Sales (1.9) 81.0 21.1 47.8 29.9 Total liabilities 6.0 6.0 7.9 11.8 15.1
EBITDA norm (1.2) 141.8 54.5 50.8 35.9 Minorities 0.0 0.0 0.0 0.0 0.0
NPAT norm (107.5) n/m 69.7 84.9 47.4 Shareholders equity 4.1 6.5 8.8 13.4 20.2
EPS norm (cents) (107.1) n/m 69.0 84.9 47.4
DPS (cents) n/m n/m n/m n/m n/m Cash flow ($m) FY20A FY21A FY22E FY23E FY24E
Operating cash flow 1.7 3.4 3.1 9.1 10.3
Margins and returns (%) FY20A FY21A FY22E FY23E FY24E Maintenance capex (0.7) (1.8) (1.6) (1.8) (1.9)
EBITDA margin 23.0 30.7 39.2 40.0 41.8 Free cash flow 1.0 1.6 1.5 7.3 8.4
EBIT margin (5.4) 14.5 22.5 26.4 29.6 Growth capex (0.7) (1.8) (1.6) (1.8) (1.9)
PBT margin (5.4) 12.6 20.8 25.1 28.5 Acquisitions/disposals 0.0 0.0 0.0 0.0 0.0
NPAT margin 1.4 17.2 24.1 30.1 34.2 Dividends paid 0.0 0.0 0.0 0.0 0.0
ROA n/m 9.8 13.8 15.9 16.6 Other cash flow (0.0) (0.3) (0.0) 0.0 0.0
ROIC n/m 29.9 35.7 72.7 101.0 Cash flow pre-financing 0.2 (0.5) (0.2) 5.5 6.5
ROE 1.6 22.5 28.1 34.2 33.5 Funded by equity 3.6 (0.0) 0.0 0.0 0.0
Funded by cash/debt (6.8) 1.1 0.2 (5.5) (6.5)
Interims ($m) 1H21A 2H21A 1H22A 2H22E 1H23E
Sales 4.3 4.2 4.9 5.4 6.9 Liquidity FY20A FY21A FY22E FY23E FY24E
EBITDA norm 1.5 1.2 2.2 1.8 2.7 Cash conversion (%) 166.1 135.9 76.6 139.8 113.8
EBIT norm 0.7 0.5 1.6 0.7 1.8 Net debt ($m) (3.1) (2.4) (2.4) (7.9) (14.4)
PBT norm 0.6 0.5 1.6 0.6 1.7 Net debt / EBITDA (x) (2.9) (0.9) (0.6) (1.3) (1.7)
NPAT norm 0.8 0.7 1.7 0.8 2.0 ND / ND + Equity (%) (318.8) (58.1) (36.3) (143.1) (248.7)
NPAT reported 0.8 0.7 0.2 0.8 2.0 EBIT / Interest expense (x) n/m 7.7 13.2 20.9 27.6
EPS norm (cents) 0.6 0.5 12.7 0.6 1.5
DPS (cents) 0.0 0.0 0.0 0.0 0.0 Valuation FY20A FY21A FY22E FY23E FY24E
EV / Sales (x) 8.3 4.7 3.9 2.3 1.4
Stock specific FY20A FY21A FY22E FY23E FY24E EV / EBITDA (x) 36.3 15.3 9.9 5.7 3.4
Project Revenues 2.4 6.2 8.1 12.5 16.1 EV / EBIT (x) n/m 32.5 17.3 8.6 4.8
Support Revenues 1.6 1.8 2.0 2.4 3.4 P / E (x) n/m 28.8 17.1 9.2 6.3
Royalty Revenues 0.7 0.5 0.3 0.3 0.3 P / BV (x) 9.3 6.5 4.8 3.2 2.1
Total Operating Revenue 4.7 8.5 10.3 15.2 19.8 FCF yield (%) 2.6 3.8 3.6 17.3 19.9
% Recurring Revenue 50.4 73.2 78.2 82.1 81.4 Dividend yield (%) 0.0 0.0 0.0 0.0 0.0
% Non-Recurring Revenue 49.6 26.8 21.8 17.9 18.6 Payout ratio (%) 0.0 0.0 0.0 0.0 0.0
Gross Profit 2.7 6.2 7.3 11.0 14.2 Weighted shares (m) 117.3 130.2 130.7 130.7 130.7

Source: Company data, Wilsons estimate, Refinitiv.

All amounts are in US Dollar ($) unless otherwise stated.

Wilsons Equity Research Page 2

29 August 2022 Information Technology
Etherstack PLC

1H22 Result – Key Insights

Etherstack today released its 1H22 result. Here are the key insights:
• Revenue came in at US$4.9m which was -14% below our forecast, but +13% vs. pcp. Segmentally: Project
Revenues grew +29% to $3.8m (WILSe: $4.4m) primarily driven by Samsung’s AT&T Firstnet deployment, the
Australian Department of Defence project, and multiple WA resources project follow-on orders; ii) Support
Revenue fell -7% to $927k (WILSe: $895k) primarily due to no major networks deployed in 1H22; and Royalty
Revenue was $115k, down -69% vs. pcp due to royalties in 1H22 that didn’t continue in 1H22.

• Gross Profit of US$3.8m grew +14% and was in-line with our forecast, but only due to the Gross Margin of
77% outpacing our 67% forecast (pcp: 76%). ESK noted that gross margins can fluctuate, but didn’t vary much
in 1H22 due to limited changes in its revenue mix.

• EBITDA of ~US$2.2m was up +53% vs. pcp (and +12% above our $2.0m forecast) reflecting an EBITDA
margin of 46%, well above our 35% forecast and the 34% in the pcp.

• NPAT of $1.7m was +28% above our forecast of US$1.3m and just over double the pcp (US$0.8m). We note
that ESK recorded a pre-tax benefit of US$0.8m due to FX: a $500k FX headwind in 1H21 became a US$300k
FX tailwind in 1H22.

• Contracts Wins: i) MCX-IWF/Samsung: Signed in Jul-21 to deploy the technology to AT&T Firstnet. This project
is underway and ESK continued to pursue opportunities for MCX IWF in conjunction with Samsung; ii) Defence
& Government: ESK had deployed a “Push-To-Talk over Satellite” IVX pilot which, if successful, could lead to
“significant follow-on opportunities”. No other major new contracts were awarded in 1H22; and iii) Resources:
ESK won 2 follow-on orders in 1H22 worth A$1.8m from a major WA iron ore mining company. That same
company has given ESK a total of 8 since May-20 worth ~A$3m.

• Key Future Opportunities: i) Samsung: ESK is actively pursuing a number of opportunities in conjunction with
Samsung, for the MCX IWF product; ii) NATO NBWF: ESK has launched its NATO NBWF product, a medium-
term opportunity; and iii) Land Mobile Radio: ESK intends to leverage its recent successes (eg. WA iron ore) into
new contract wins.

• Outlook: ESK expects Support Revenues to increase in 2H22 and for FY22 to exceed FY21 (WILSe FY22e:
$1.8m vs. FY21: $1.6m). Additionally, management expects FY2023 support to increase significantly based on
carrier support revenue pull through from projects delivered in H2 2022. We also note that ESK ended the
period with US$0.6m in cash and cash equivalents. Seasonality and timing issues are likely influences here –
we note cash and accounts receivable summed to $5m this half vs $6.3m the in pcp.

Figure 1: Results Summary

ES K De v ia t ion Ta ble H1 2 1 A H1 2 2 A % gr owt h (pcp) WI L S e 1 H2 2 v s. WI L S e

Project Revenues 2.95 3.82 29% 4.37 -13%

Support Revenues 0.99 0.93 -7% 0.89 4%

Royalty Revenues 0.37 0.12 -69% 0.41 -72%

Operating Revenue 4.32 4.86 13% 5.67 -14%

Cost of Sales -1.02 -1.11 -7% -1.87 -41%
Gross Profit 3.29 3.75 14% 3.80 -1%
margin % 76% 77% 67%
Net Admin Expense (ex. D&A) -1.40 -1.92 -27% -1.87 2%

FX -0.50 0.32 NM 0.00 n/m

Other Income 0.06 0.06 13% 0.05 16%

Net Operating Expense -1.84 -1.54 20% -1.82 -16%

EBITDA (Underlying.) 1.45 2.22 53% 1.98 12%

margin % 34% 46% 35%
Depreciation and Amortisation -0.75 -0.61 24% -0.82 -26%
EBIT (Underlying.) 0.70 1.61 NM 1.16 39%

margin % 0.16 0.33 0.20 62%

Finance Costs -0.09 0.05 -0.08 -162%

Profit Before Tax (Underlying.) 0.61 1.66 NM 1.07 55%
margin % 14% 34% 19%

Income tax benefit (expense.) 0.20 0.10 -51% 0.21 -55%

Net Profit/(loss) after Tax (Underlying.) 0.81 1.76 NM 1.29 36%

Significant Items -0.01 -0.10 NM 0.00 n/m

Net Profit/(loss) after Tax (Reported) 0.80 1.65 107% 1.29 28%
Source: Wilsons, Etherstack.

Wilsons Equity Research Page 3

29 August 2022 Information Technology
Etherstack PLC

Samsung Agreement and Nokia Announcement

 Samsung

In February 2022 in ESK’s FY21 Results presentation they provided a goal to win between 2-4 contracts that could
each range from US$2m-US$8m. A summary of our forecasts are outlined below (Figure 5). We are conservative,
estimating only 1 new Samsung deal at $2m in FY22e which was at the lower end of both their number of new
deals (2-4) and deal’s dollar value range ($2m-$8m). This conservative estimate may prove to be correct given that
we are now ~8 months of the way through FY22e and ESK is still yet to win a new Samsung contract. ESK have
indicated that they expect to announce their second Samsung contract in the second half of FY22 (the first was in
Sept 2021). This slower run-rate ultimately reveals the difficulty in forecasting contract wins from large
multinationals and how conservatism can reflect the contingency for ‘slippage’ risk.

ESK also removed their formal yearly guidance for the number of new contracts won and the average dollar value of
each contract and to a more general goal of ‘targeting >25 new contract wins over the medium term’. This still
provides a significant revenue opportunity given 25 contracts could represent a total of US$125m (based on the
midpoint of both the number of contract wins and the contract value range) over the medium term (likely 5-10
years).

 Recap on Etherstack’s Value Proposition for Samsung

Etherstack’s value proposition is that “its technology enables interoperability between existing digital narrowband
public safety network infrastructure used by public safety agencies globally, and the new 5G network”. In more
technical terms, “Etherstack is the key technology licensor to wireless equipment manufacturers of the underlying
technologies used in existing digital land mobile radio networks”. It was under Etherstack’s Global Teaming
Agreement with Samsung that AT&T could enhance FirstNet which was created by the US congress to provide first
responders with a nationwide, high-speed, wireless network dedicated to public safety. To emphasise the point, it is
Etherstack's positioning as a leading global licensor of Land Mobile Radio (“LMR”) technologies that differentiates
ESK from its competitors in the Mission Critical Push to Talk (“MCPTX”) space and thus places ESK in a strong
position in the MCPTX market.

 Robert Fowler from AT&T at APCO 2022 on Samsung’s and Etherstack’s Involvement
in developing FirstNet

To date, users who have tested FirstNet have “overwhelmingly applauded the performance and audio-quality
apsects of the push-to-talk offering since it was launched in March 2019. However, relatively few have indicated
that they would use FirstNet PTT, in large part because the MCPTT offering did not allow interoperable
communications with LMR radio systems. However, this is rapidly changing [due] deployment of the Samsung-
Etherstack technology could be the first interworking function deployment in the world on a large-scale basis.”

The full article can be found here.

 Nokia – Pilot Contract Win Announced

ESK today announced that it has entered into a contract with “Nokia Solutions and Networks Australia Pty Ltd” to
supply professional services and a pilot license for the deployment of ESK’s MCX LMR-IWF product. The contract
revenue is ~A$0.75m (~US$0.5m), all of which is expected to be recognised this FY20. We are forecasting US$5.8m
in 2H22e revenue, so this contract alone could represent ~10% of our 2H22e forecast.

While this announcement is only modest in financial terms, it is meaningful from both the implicit and explicit
validation that this contract has, and is the first contract with a leading global telco outside of Samsung, which
arguably bodes well not only for future work with Nokia, but other global telcos also.

Wilsons Equity Research Page 4

29 August 2022 Information Technology
Etherstack PLC

Insights into Recurring Revenue

Total recurring revenues fell in 1H22, reflecting volatility in royalty revenues which are impacted by the timing of
contract wins and/or revenue recognition requirements (eg. in 2020, ESK won a 4-year contract that required all the
revenue to be recognised in that year, while the cash will be collected over multiple years). Nonetheless, ESK’s
support revenue has grown at a CAGR of ~14% p.a. since 1H18 whilst royalty revenue, although volatile, has grown
at ~7% p.a., and has been less consistent. We see ESK’s recurring revenue growth as a significant competitive
advantage as it provides it with visibility into its future earnings and allows the company to make more insightful
investment decisions. Non-recurring revenue is then simply further upside and can be a leading indicator for future
recurring revenue.

Figure 2: Half-On-Half Growth of Recurring Revenue (Support Revenue + Royalty Revenue)

1.6
1.4 1.4

1.2
1.0 1.1 1.0
0.9 0.9

0.8 0.8
0.6

0.4

0
1H18a 2H18a 1H19a 2H19a 1H20a 2H20a 1H21a 2H21a 1H22a

Support revenue Royalty Revenue

Source: Etherstack, Wilsons.

Ultimately though due to the large dollar value of upfront project revenue, the overall proportion of recurring
revenue as a % of total revenue is variable due to the infancy of the large-scale contract wins (e.g. Samsung wins)
and the nature of those contracts.

With the support revenue associated with the Samsung Contract starting in late 2022 we expect the proportion of
revenue that is derived from recurring revenue will increase. This bodes very well for the medium and long term.
Depending on the timing and scale of new project wins though, it will untimely remain a small % of total revenue
despite it being high quality in nature. It’s important to note though that if Samsung-like deals are onboarded faster
than we forecast, recurring revenue could go backwards (as a % of total revenue) in some years due to the large
upfront project revenue being won.

Figure 3: Recurring Revenue as Percentage of Total Revenue

1 H1 8 a 1 H1 9 a 1 H2 0 a 1 H2 1 a 1 H2 2 a 1 H2 3 e
Recurring Support and Royalty Revenue 0.6 0.8 0.9 1.4 1.0 1.1
Project and product revenues 1.2 0.9 1.5 3.0 3.8 5.8
Total Revenues 1.9 1.7 2.4 4.3 4.9 6.9
% Recurring Revenue to Total Revenue 34% 45% 39% 32% 21% 15%

Total Revenue Growth -9% 40% 79% 13% 42%

Source: Etherstack, Wilsons.

Wilsons Equity Research Page 5

29 August 2022 Information Technology
Etherstack PLC

Forecast Revisions
In light of today’s results, we have reduced our top-line forecasts by ~$1.5m across FY22e-FY24e to reflect the
~$0.5m miss to our 1H22 estimates and uncertainty in ESK’s royalty revenue. These revised estimates especially in
FY23 onwards could be conservative if ESK was to win any new large contracts (e.g. another Samsung deal). On the
EBITDA line our forecasts fall by around -$0.5m in each year on the back of the lower revenue estimates and less
operating leverage.

Figure 4: Summary of Forecast Revisions

2022E 2023E 2024E
Y/E: 31 Dec (US$m)
New Old $ Diff (%) Diff New Old $ Diff (%) Diff New Old $ Diff (%) Diff

Revenue 10.3 11.8 -1.5 -13% 15.2 16.7 -1.5 -9% 19.8 21.3 -1.5 -7%

EBITDA (Underlying.) 4.2 4.4 -0.2 -5% 6.1 6.5 -0.4 -6% 8.3 8.7 -0.4 -5%

EBIT (Underlying.) 2.4 2.7 -0.2 -8% 4.0 4.4 -0.4 -9% 5.8 6.3 -0.4 -7%

NPAT (Underlying.) 2.6 3.0 -0.4 -12% 4.6 5.1 -0.5 -10% 6.8 7.3 -0.5 -7%

Diluted EPS (Underlying.) (cps.) 2.0 2.2 -0.2 -11% 3.5 3.8 -0.3 -8% 5.2 5.4 -0.3 -5%
Source: Wilsons.

We value ESK using a FY23e EV/EBITDA multiple of 10.5x, which results in a target price of $0.70, down 7% from
our previous target price of $0.75. This FY23e EV/EBITDA multiple of 10.5x represents a 27% premium to the ASX
Project and Transactional Technology and a 39% premium to the ASX Telco and Media companies relative to other
local listed telco peers which seems justifiable given its stronger growth forecast for EBITDA.

Figure 5: FY23 EV/Sales Summary

Mult iple s Va lua t ion S pot Ta r ge t % P r e mia /(discount ) t o S pot
Ent e r pr ise Va lue A$ 6 0 .3 9 1 .2 51%
Net Debt A$ -0.1 -0.1
Ma r ke t Ca pit a lisa t ion A$ 6 0 .3 9 1 .3 51%
Diluted Shares Outstanding 131.1 131.1
Equit y Va lue P e r S ha r e A$ 0 .4 6 0 .7 0 51%
Source: Wilsons, Etherstack.

Below provides an outline of ESK’s trading multiples compared to its locally listed peers.

Figure 6: Comparable Company Valuations

EBITDA Growth EV/Revenue EV/Gross Profit EV/EBITDA P/E EPS Growth FCF Yield
ESK Comparables Table Market Cap. TEV
FY+1 FY+2 FY+3 FY+1 FY+2 FY+3 FY+1 FY+2 FY+3 FY+1 FY+2 FY+3 FY+1 FY+2 FY+3 FY+1 FY+2 FY+3 FY+1 FY+2 FY+3
Project and Transactional Technology
Integrated Research Ltd 84 78 110% 34% 30% 1.1x 1.0x 0.9x NM NM NM 6.7x 5.0x 3.9x NM 24.8x 11.8x -5% NM 110% NM NM NM
Nitro Software Ltd 291 158 0.1 -0.4 -0.6 2.3x 2.0x 1.6x 2.6x 2.1x 1.8x NM NM NM NM NM NM NM NM NM -6% -2% 2%
Whispir Ltd 115 91 -0.6 -1.8 1.4 1.2x 1.0x 0.8x 2.2x 1.8x 1.5x NM 21.7x 9.1x NM NM NM NM NM NM -9% -3% 2%
Bravura Solutions Ltd 414 403 -22% 8% 14% 1.5x 1.4x 1.3x NM NM NM 8.2x 7.7x 6.7x 15.8x 14.5x 12.4x -24% 9% 17% 8% 8% 10%
Data#3 Ltd 947 833 12% 12% 10% 0.3x 0.3x 0.3x 1.7x 1.5x 1.4x 14.4x 12.8x 11.6x 26.3x 23.9x 21.4x 20% 10% 12% 4% 7% 6%
Hansen Technologies Ltd 1,007 1,060 -3% 2% 4% 3.4x 3.3x 3.3x NM NM NM 11.0x 10.7x 10.3x 21.0x 19.7x 18.7x 16% 7% 5% 6% 6% 6%
Codan Ltd 1,274 1,348 4% 8% 3% 2.5x 2.3x 2.3x 4.1x 3.8x 3.7x 7.9x 7.4x 7.1x 12.4x 11.4x 10.9x 3% 8% 5% 6% 8% 9%
Median 4% 8% 10% 1.5x 1.4x 1.3x 2.4x 2.0x 1.6x 8.2x 9.2x 8.1x 18.4x 19.7x 12.4x 3% 9% 12% 5% 7% 6%
Average 7% -21% 19% 1.8x 1.6x 1.5x 2.6x 2.3x 2.1x 9.7x 10.9x 8.1x 18.9x 18.9x 15.0x 2% 9% 30% 2% 4% 6%

Telecommunications and Media

Enero Group Ltd 306 264 12% 6% 10% 1.1x 1.0x 0.9x NM NM NM 3.6x 3.4x 3.1x 9.3x 9.1x 8.6x 20% 3% 5% 22% 18% 22%
Over The Wire Holdings Ltd NM NM NM NM NM NM NM NM NM NM NM NM NM NM NM NM NM NM NM NM NM
HT&E Ltd 414 572 116% -2% 5% 1.6x 1.6x 1.6x 4.8x 4.8x 4.7x 6.1x 6.2x 5.9x 8.9x 9.1x 8.3x NM -3% 10% 13% 16% 17%
Symbio Holdings Ltd 352 321 -4% 11% 17% 1.5x 1.4x 1.3x 3.1x 2.9x 2.7x 9.0x 8.1x 6.9x 26.3x 22.7x 19.8x 79% 16% 15% 4% 1% 4%
oOh!media Ltd 856 1,719 -45% 9% 4% 2.9x 2.7x 2.6x NM NM NM 13.7x 12.6x 12.1x 17.1x 14.6x 13.4x NM 17% 10% 4% 5% 11%
Median 4% 7% 7% 1.6x 1.5x 1.4x 4.0x 3.9x 3.7x 7.6x 7.2x 6.4x 13.2x 11.9x 11.0x 49% 9% 10% 8% 11% 14%
Average 20% 6% 9% 1.8x 1.7x 1.6x 4.0x 3.9x 3.7x 8.1x 7.6x 7.0x 15.4x 13.9x 12.5x 49% 8% 10% 11% 10% 13%

Etherstack PLC 57 57 59% 46% 36% 3.9x 2.6x 2.0x 5.4x 3.6x 2.8x 9.6x 6.5x 4.8x 15.5x 8.8x 6.0x 81% 76% 47% -2% 1% 4%

Source: Wilsons, Refinitiv, Etherstack.

Wilsons Equity Research Page 6

29 August 2022 Information Technology
Etherstack PLC

Disclaimers and Disclosures

| Recommendation structure and other definitions

Definitions at wilsonsadvisory.com.au/disclosures.

| Analyst certification

Each analyst of Wilsons Advisory and Stockbroking Limited (ACN 010 529 665: AFSL 238375) (“Wilsons”) whose name appears in this research
certifies that (1) the recommendations and opinions expressed in this research accurately reflect the analyst’s personal, independent and objective views
about any and all of the subject securities or issuers; (2) no part of the analyst’s compensation was, is, or will be, directly or indirectly, related to the
specific recommendations or views expressed by the analyst in the research; and (3) to the best of the analyst’s knowledge, he/she is not in receipt of
material non-public information about the issuer.

| Disclaimer

This document has been prepared by Wilsons. This communication is not to be disclosed in whole or part or used by any other p arty without Wilsons’
prior written consent. All material presented in this document, unless specifically indicated otherwise, is under copyright to Wilsons. None of the
material, its content, nor any copy of it, may be altered in any way, transmitted to, copied or distributed to any other party, without the prior express
written permission of Wilsons. This document is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident
of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or
regulation or which would subject Wilsons to any registration or licensing requirement within such jurisdiction.

This document is being supplied to you solely for your information and no action should be taken on the basis of or in reliance on this document. To the
extent that any information prepared by Wilsons contains any financial product advice, it is general advice only and has been prepared by Wilsons
without reference to your objectives, financial situation or needs. You should consider the appropriateness of the advice in light of your own objectives,
financial situation and needs before following or relying on the advice. You should also obtain a copy of, and consider, any relevant disclosure document
before making any decision to acquire a financial product. Please refer to Wilsons’ Financial Services Guide for more information:
wilsonsadvisory.com.au/disclosures. Any person, before acting on any advice contained within this communication, should first consult with a Wilsons
investment adviser to assess whether the advice within this communication is appropriate for their objectives, financial situation and needs. Those acting
upon such information without advice do so entirely at their own risk.

This document provided by Wilsons is current as at the date of the issue but may be superseded by future publications. Wilsons assumes no obligation
to update the information or advise on further developments relating to the company or companies covered in this document (“Companies”) or relevant
financial products. Wilsons has not independently verified all of the information given in this document which is provided at a point in time and may not
contain all necessary information about the Companies. Wilsons makes no warranty, express or implied, concerning any information prepared by
Wilsons. Wilsons expressly disclaims (1) any implied warranty of merchantability or (2) fitness for a particular purpose, including any warranty for the
use or the results of the use of any information prepared by Wilson s with respect to their correctness, quality, accuracy, completeness, reliability,
performance, timeliness, or continued availability. Wilsons’ research content should be viewed as an additional investment resource, not as your sole
source of information. To the fullest extent permitted by law Wilsons, its related bodies corporate and their respective officers, directors, employees or
agents, disclaim any and all liabilities for any loss or damage howsoever arising in connection with the use of this document or its contents. Past
performance does not necessarily indicate a financial product’s likely future performance.

This document may contain “forward-looking statements”. Forward-looking statements, opinions and estimates provided in this document are based on
assumptions and contingencies which are outside the control of Wilsons and are subject to change without notice (including but not limited to economic
conditions, market volatility and company-specific fundamentals), and therefore may not be realised in the future.

This report does not constitute an offer or invitation to purchase any securities and should not be relied upon in connection with any contract or
commitment whatsoever.

Wilsons Equity Research Page 7

29 August 2022 Information Technology
Etherstack PLC

Disclaimers and Disclosures

| Regulatory disclosure

Wilsons restricts research analysts from trading in securities for which they write research. Other Wilsons employees may hold interests in the company,
but none of those interests are material. Wilsons further advises that at the date of this report, neither Wilsons Advisory and Stockbroking Limited or
Wilsons Corporate Finance Limited have any material interests in the company. Wilsons Corporate Finance Limited ACN 057 547 323, AFSL 238 383
acted as Lead Manager in the December 2020 institutional placement of Etherstack PLC securities for which it received fees or will receive fees for acting
in this capacity.

Wilsons Advisory and Stockbroking Limited may have a conflict of interest which investors should consider before making an investment decision.
Wilsons Advisory and Stockbroking Limited, Wilsons Corporate Finance Limited and its related bodies corporate trades or may trade as principal in the
securities that are subject of the research report. Wilsons further advises that at the date of this report, neither Wilsons Advisory and Stockbroking
Limited or Wilsons Corporate Finance Limited have any material interests in the company. Wilsons restricts research analysts from trading in securities
for which they write research. Other Wilsons employees may hold interests in the company, but none of those interests are material.

| Wilsons contact

For more information please phone: 1300 655 015 or email: publications@wilsonsadvisory.com.au

Wilsons Equity Research Page 8