DW8 : Amended Quarterly Activities/Appendix 4C Cash Flow Report

ABN 59 086 435 136

Dean Taylor	For more information about DW8:
Chief Executive Officer	Website:www.dw8.com.au
P: [phone]	Blog & Media:https://www.dw8.com.au/insights
E:[e-mail]

ASX Announcement

Amended Quarterly Report 31 March 2022

DW8 Limited (ASX: DW8), or the "Company", provides the attached amended Quarterly Report.

The Previous Quarter cash and cash equivalents listed at item 5.5 of the FY2022 Q3 Appendix 4C was presented consistent the previous quarterly 4C and did not reflect the revised accounting treatment whereby we are excluding cash held in term deposits as security against property lease guarantees from cash and cash equivalents, as disclosed in the Quarterly Report.

This re-submission amends this presentation so that the Item 5.5 - Cash and cash equivalents at the end of the previous quarter is presented in a consistent treatment as Item 4.1 - Cash and cash equivalents at beginning of period.

END

This ASX announcement was approved and authorised for release by the Board of Directors.

ABN 59 086 435 136

ASX Announcement

QUARTERLY REPORT - 31 MARCH 2022 (Q3 FY2022)

Step change in operating metrics following Kaddy acquisition; consolidation prepares platform for expected growth

HIGHLIGHTS

• ● Operating revenue of A$4.6 million in Q3 FY2022, down 15% on the prior quarter Q2 FY2022 but up 497% on Q3 FY2021. This includes revenue contribution from Kaddy for the full quarter, acquired in December 2021. This reduction is explained below.

• ● Trading backdrop The March quarter is seasonally the liquor industry's lowest revenue quarter (with the December quarter being the highest). Expected beverage consumption volumes during the period were also negatively impacted by Covid and flooding on Australia's East Coast.

• ● Kaddy acquisition consolidated for the first time for a full quarter contributed to a significant structural increase in key operating metrics: trading GMV, revenue, new suppliers and customers.

• ● Platform operating metrics (across combined platform):

  • ○ Active Suppliers of 1,178, up 8% on the prior quarter (up 321% on Q3 FY2021)

    • ○ Overlap of suppliers now using both Fulfilment & Marketplace platforms at the end of March was just 4%, indicating considerable upside still available

  • ○ Marketplace:

    • ○ GMV of A$4.3m, up 169% on the prior quarter

    • ○ Trade Buyers of 1,646, up 13% on the prior quarter

    • ○ Brands of 1,261, Product SKUs of 12,704

  • ○ Fulfilment:

    • ○ Cases Shipped of 313k, down 18% on the prior quarter but up 393% on Q3 FY2021

    • ○ Average number of cases shipped per order was 4.13, up 10.5% on the prior quarter

• ● Project One: consolidation of all operations under a single brand 'Kaddy' simplifying business into two core divisions: Kaddy Fulfilment and Kaddy Marketplace.

  • ○ Kaddy Marketplace division: Project One initiatives underway expected to generate cost savings of circa $3m p.a. or $750k per quarter.

  • ○ Kaddy Fulfilment division: Project One initiatives underway expected to generate further cost savings.

  • ○ Full benefits of cost savings are expected to be visible from the September quarter onwards, with the majority of one-off restructuring costs having already been taken this quarter.

• ● Kaddy Fulfilment price increase: to take effect from 1 July 2022, expected to increase fulfilment revenue by 4-5%. This is separate to a new Fuel Levy of 7%, introduced in mid-April, to recover 3rd party transport cost increases that the business has been absorbing.

• ● Cash at bank of A$7.2m at 31 March 2022 (includes cash received in February of A$4.3m from the purchase, sale and long-term leaseback of the National Distribution Centre (NDC)). Cash at bank excludes circa $1.9m in term deposits as securities for property related bank guarantees.

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1

DW8 Limited (DW8: ASX), or the "Company", owns and operates Kaddy, an integrated marketplace & logistics platform that provides beverage suppliers an end-to-end supply chain solution that allows them to connect with buyers, simplify operations, streamline payments and deliver a superior fulfilment experience, is pleased to provide a summary of activity undertaken in the March quarter, Q3 FY2022.

'PROJECT ONE' - BRINGING ALL OPERATIONS UNDER A SINGLE BRAND 'KADDY'

During the quarter, DW8 launched a company-wide initiative to consolidate four legacy brands and operating entities under a single brand 'Kaddy', releasing operational efficiencies, material cost savings, new revenue generation opportunities and deeper levels of customer engagement while preparing the platform for the next phase of growth. This simplification has resulted in the creation of two core business divisions:

• ▪ Kaddy Marketplace

▪

Kaddy Fulfilment (formerly WINEDEPOT LOGISTICS)Under Project One, DW8 will under a single brand umbrella, 'Kaddy' take advantage of latent synergies available by integrating several strategic acquisitions the Company has made in the last two years (which include Kaddy, Parton Wine Distribution and Wine Delivery Australia). Bringing these businesses together into a single, brand-led, end-to-end solution compounds the value of the synergies and brand awareness while enhancing the customer value proposition and providing step changes in capability across both the Marketplace and Fulfilment divisions of the business. For further detail on Project One, seeASXannouncement dated 10 March.

Key points:

• ▪ Consolidation of brands and business units is expected to release material savings; generate additional revenues, prepare the platform for further scaling and develop a deeper level of engagement with the existing customer base.

• ▪ Kaddy Marketplace cost savings: cost-saving initiatives being rolled out across the Marketplace division are expected to reduce the current cost base by over $3m p.a. or $750k per quarter.

• ▪ Kaddy Fulfilment cost savings: a range of technology and operational integration projects that are expected to improve the profitability of this division will be undertaken during calendar 2022 (yet to be announced).

• ▪ The majority of the savings will take effect in the June ending quarter, with the full benefit of these cost savings visible from the September quarter onwards.

KEY FINANCIAL RESULTS

Operating Revenue: DW8 generated A$4.6m in Operating revenue in Q3 FY2022, down 15% on the prior quarter Q2 FY2022 but up 497% on Q3 FY2021. Key factors impacting revenue during the quarter:

• ● March quarter is seasonally the liquor industry's lowest revenue quarter, with the December quarter being the highest

• ● Beverage consumption during the period was also negatively impacted by:

  • ○ Major product supply issues (due to Covid)

  • ○ On-premise venue closures and reduced trading hours (due to Covid)

  • ○ Extensive flooding on Australia's East Coast

The impact from newly consolidated Kaddy on revenue and key operating metrics was seen for a full quarter for the first time.

Operating cashflows: The Appendix 4C accompanying this quarterly report reflects for the first time the contribution of the Kaddy acquisition for a full quarter. Please note that there have been some allocation changes made within the prior quarter balances in the attached Appendix 4C to align with the Company's independently audited H1 FY2022 Interim Report. These include:

• 1. The net proceeds of Kaddy Marketplace sales are now shown at Cash Receipts item 1.1. Previously Marketplace supplier payments were included in Product Manufacturing and Operating Costs item 1.2b and Marketplace buyer receipts in Cash Receipts item 1.1.

• 2. Cash outflows for leases are now identified on a separate line at item 1.2d. Previously these were included within Product Manufacturing and Operating Costs item 1.2b.

• 3. Cash outflows of $3,804,619 relating to settlement of Parton pre-acquisition liabilities that were previously presented in the Section 2 Cash flows from investing activities have been reallocated to Section 1 Cash flows from operating activities within the Year to date total included at item 1.8.

• 4. Cash and cash equivalents at beginning of period item 4.1 differs from the previous Appendix 4C as it has been adjusted for cash held in term deposits as security against property lease bank guarantees.

OUTLOOK

DW8 CEO Dean Taylor said, "Given the difficult trading backdrop, the results and progress that DW8 and the Kaddy team has managed to achieve in the last three months is highly commendable."

"Like many businesses, a large percentage of our workforce has been forced to take leave due to Covid. At the same time, we have seen a huge rebound in the number of orders being generated by our customers, with our case shipments in March finishing only just short of the record highs we saw in November."

"We've also positively experienced a large influx of new suppliers who have moved across from competitors due to our superior service levels. The onboarding of these new accounts, together with the record order volumes from our existing customers and reduced labour force has placed unprecedented demand on our entire team."

"Despite the intense workload the team has managed to maintain relatively high service levels and roll out many of the company building initiatives under Project One."

"While there's still plenty of work to do, I'm confident that by the end of June we'll have substantially worked through this consolidation phase and the investment made will not only release material cost savings and synergies but position us well for the next phase of expected growth."

"The combination of the new fuel levy (introduced in April 2022), rate card increases (effective July 2022) and material cost savings are expected to improve both cashflow and profitability from the September quarter onwards."

OPERATING METRICS - ACROSS PLATFORM'S TWO KEY COMPONENTS:

KADDY COMBINED PLATFORM

• ▪ Active Suppliers using the Company's platform, increased to 1,178, up 8% on the prior quarter (up 321% on Q3 FY2021).

• ▪ The overlap of suppliers using both Fulfilment & Marketplace platforms at the end of March was just 4% indicating that there's still considerable upside available to be released through the planned integration under Project One.