K2fly : K2F Quarterly Activities Report and Appendix 4C

Invoices Raised were $2.5m in Q2 FY2022, up 58.5% compared to Q2 FY2021

Cash Receipts from Customers were $2.7m in Q2 FY2022, up 59.8% compared to Q2 FY2021 Cash balance on 31 December 2021 was $3.6m (no debt) and trade receivables were $1.5m

ASX Release

ASX code: K2F27 January 2022

	Q2 FY2022 Quarterly Activities Report
	Continued growth in TCV and ARR following continued signing of record
	contracts
Highlights
•	Total Contract Value (TCV) growth of 18.1% to $16.6m in Q2 FY2022, over prior quarter and
only	182.9% over Q2 FY2021
•	Annual Recurring Revenue (ARR) growth of 18.0% to $4.8m in Q2 FY2022, over prior quarter and
	101.2% over Q2 FY2021
•	Largest contract signed to date with Rio Tinto (TCV $3.44m / ARR $620k) on a 5-year contract
use•	term and Glencore Canada Corporation existing contract extended for further 3 years (TCV
$443k / ARR $130k). This follows consecutive record deals in Q4 Roy Hilland Q1 Sibanye Stillwater
ARR average deal size grew threefold to >$370k in the first half of FY2022, from less than $100k
•	Significant growth expectations for Ground Disturbance solutions as the only commercial off-
	the-shelf (COTS) offering in the market today
•	Cost increases to scale team to meet the contracted and expected demand for new projects
personalFor	and expansion of existing projects. Work in Progress (WIP) of $1.2m and growing with new PO
from Rio Tinto to scope "Heritage 2"

•

•

•

K2fly Limited (K2F, K2fly or the Company) (ASX: K2F), a provider of 'net positive impact' solutions in Environmental, Social and Governance (ESG) compliance, disclosure, and technical assurance, to operations of mining and asset intensive industries through its platform-based SaaS cloud solutions, is pleased to provide commentary regarding its activities for the December quarter, Q2 FY2022.

CONTRACTS AND FINANCIAL RESULTS

K2fly Limited ACN 125 345 502

www.k2fly.com|[e-mail]

[phone]

4/502 Hay Street Subiaco WA 6006

TCV & ARR1: Two major contracts were signed during the December quarter, Q2 FY2022 (Rio Tinto and an existing contract extended with Glencore Canada Corporation), resulting in double-digit growth in TCV of 18.1% and ARR of 18.0% in the quarter compared to the prior quarter (Q1 FY2022) and up 182.9% and 101.2% respectively compared to Q2 FY2021. See Major Contracts section of

onlythis report for more detail.

Invoices Raised and Cash Receipts: Invoices Raised during the quarter were $2.5m, down 3.3% over the prior quarter and 58.5% higher compared to Q2 FY2021. Invoices Raised vary due to the a niversary dates of the client contracts, and the timing of implementation fees. Licence and SaaS fees are billed annually, in advance.

Cash Receipts from Customers during the quarter were $2.7m, down 1.9% over the prior quarter and up 59.8% compared to Q2 FY2021. Cash Receipts is also influenced by an annual invoicing cycle as

usexplained above.

Both Invoices Raised and Cash Receipts grew strongly in the first half of the financial year to date, 1H FY2022, compared to 1H FY2021.

personalForNic Pollock CEO of K2fly said "In this quarter, we achieved the signing of our largest contract to date on a 5-yearterm with Rio who have continued to take up more of our solutions.

1 Exchange rate fluctuations impact ARR and TCV.

K2fly Limited ACN 125 345 502

www.k2fly.com|[e-mail]

[phone]

4/502 Hay Street Subiaco WA 6006

We added an additional $800k of ARR in the quarter which is a new record from last quarter ($700k) which is helped by a dramatic increase in our average ARR deal size to $373k up from $100k in FY20.

The ESG thematic and ongoing focus by leading international mining companies to manage risk continues to build.

onlyWe continue to execute on our land and expand strategy with clients and solutions coupled by

being the sole COTS supplier of many of the ESG solutions we offer - Mineral Inventory, Heritage and Ground Disturbance to name a few.

We have continued to expand the team to meet new, larger contracts and to scale to meet anticipated new contracts with tier 1 clients.

We remain focused on our strategy to 'land and expand' our solutions with existing and new clients. Our sales and development pipeline of new logo contracts and customer expansion will continue to drive the rapid ARR and TCV growth.

useCONTRACTS Major Contracts

Rio Tinto (announced 5 October 2021): A 5-year contract was signed for K2fly's Natural Resource Governance - Ground Disturbance solution, to be implemented in the Pilbara region of Western Australia. Rio Tinto operates the world's largest integrated portfolio of iron ore assets. The contract expands the number of K2fly's solutions used by Rio Tinto to five out of nine solutions which already i clude: Resource Inventory & Reconciliation, Dams & Tailings, Community & Heritage and Mine Geology Data Management.

Glencore Canada Corporation (announced 10 November 2021): A 3-year contract extension was signed for K2fly's Mineral Resource Governance - RCubed Resources & Reserves Solution through to December 2026 (previously an annual contract), for global zinc operations across 56 sites in 7 countries.

Summary of major new contracts signed

Client

TCV (AU$)

ARR (AU$)

Term (Years)

Solution Area

Natural Resource

Rio Tinto

3.44m

620k

5

Governance

personal

(Ground Disturbance)

Glencore Canada Corporation

Mineral Resource and

443k

130k

3

Reserve Governance

(contract extension)

(RCubed)

For

Total Q2 FY2022

3.883m

750k

Smaller Contracts (Non-Material)

Rio Tinto: Rio Tinto have issued a Purchase Order for K2fly to scope the next phase of the Heritage project delivered in Calendar 21.

Seriti Power (Pty) Limited: A 5-year contract was signed on 14 December 2021 for K2fly's for Mineral Resource Governance - RCubed Resources & Reserves Solution across 6 sites in Seriti's South African operations.

K2fly Limited ACN 125 345 502

www.k2fly.com|[e-mail]

[phone]

4/502 Hay Street Subiaco WA 6006

▪ Signing of consecutive large contracts in recent quarters with new and existing clients.

▪ Signing of our largest contract to date with Rio Tinto this quarter (now 5 of nine solutions in use)

▪ Material increases in the average size of contracts signed

SOLUTIONS UPDATE

Decipher Tailings Solution acquisition: Following significant new client acquisitions in Q1 FY2022, K2fly continues to build additional pipeline and completed a paid proof of concept for a global mining major and International Council on Mining and Metals member.

onlyGround Disturbance Solution: Since the high-profile destruction of a culturally significant site in

Australia in May 2020, there has been an increasing focus by large mining companies on their

ground disturbance processes and systems which (in addition to Heritage systems) are fundamental

to the protection of heritage and environmentally sensitive areas and are critical for miners to

maintain their social license to operate, generate qualitative ESG outcomes and, increasingly, to

ensure the support of the investment community. K2fly's Ground Disturbance solution is the only

COTS solution in the marketplace globally and we anticipate a strong growth trajectory for this

solution. It is currently in use by Fortescue Metals Group, Westgold Resources and API Management useand is currently being implemented at Rio Tinto (see ASX announcement 5 October 2021) which is

initially limited to its Pilbara operations only.

Ground disturbance systems are complex and critical enterprise software systems, which are typically used for at least 10 years. As such, they attract higher annual license fees and longer terms. Most existing systems are bespoke developments and are generally dated. With the increased awareness of their impact on ESG performance, and the management of risk, there is a

compelling proposition to replace these incumbent systems across all the major mining companies personaland their multiple operations. As the only COTS provider of these systems globally, K2fly is well

positioned to support this transition, which potentially puts the Ground Disturbance Solution on the s me growth trajectory as the Resource Inventory and ReconciliationSolution.

CORPORATE

Strategy delivering growth: Execution of the Company's 'go to market' and 'land and expand' growth strategy with existing and new customers targeting tier-1 and tier-2 global miners is proving

uccessful as evidenced by:

Over the last three financial years, the annual average size of new contracts signed in ARR terms

has grown threefold to >$370k in the first half of FY2022, from less than $100k.

For
	K2fly Limited ACN 125 345 502
	www.k2fly.com|[e-mail]	[phone]	4/502 Hay Street Subiaco WA 6006

K2fly continues to experience strong growth of new customers, new projects, project extensions and additional phases as part of our land and expand strategy. As such we are investing heavily in building multi-functional teams to develop and deliver software to our clients all over the globe. Typically, this recruitment needs to occur in advance of projects once they are properly qualified.

onlyThe employment market is very hot across the world. This is particularly noticeable in our head office

location in Perth, where there is a war for talent in the mining sector. As such we are experiencing

higher than expected labour costs and increased spend on recruitment fees. We continue to be

as prudent as possible and balance our resources across different jurisdictions with different cost structures such as Perth, South Africa, and other low-cost development jurisdictions.

Cash position: The Company held a cash position of $3.6m at 31 December 2021 (no debt).

The cash runway calculation (estimated quarters of funding available) shown in section 8.7 of the Appendix 4C does not consider the timing of cash inflows throughout the annual billing cycle, which useare aligned with contract anniversary dates. 60% of our existing annual license contracts are due in

the second half of the fiscal year.

During Q2 we had a $769k increase in cash outflow relating to staff costs compared to Q1. This increase was driven by the following:

personal	1.	The prioritisation of implementation delivery and support for current clients over product
	development, which resulted in the lower investment of labour costs in intellectual property.
	need to bring on resources and train them in preparation for new contracts commencing.
	2.	Payment of contracted bonuses and commissions, including amounts accrued but unpaid
		in the prior year - a new sales compensation plan which incentivises large ARR and TCV
		contracts was established with effect from 1 July 2021. Commissions paid under this scheme
		are paid quarterly in arrears.
	3.	Increased recruitment fees to source a number of executive roles, and due to a greater
		reliance on recruitment consultants.
	4.	Increase in staff since the last quarter, as we continue to recruit in advance of anticipated
		implementation work. As a number of our software products are unique in the market, we

Cash receipts were also negatively affected by Christmas shutdowns in our customer base. The Company has a trade receivables balance of $1.5m as at 31 December 2021, and committed implementation revenue in excess of $1.2m.

Annual General Meeting (AGM): The Company held AGM on 29 November 2021 passing all resolutions. The Results of Meeting can be viewedhere.

Payments to related parties and their associates: In accordance with ASX Listing Rule 4.7C.3, Forpayments to related parties of the Company and their associates during the quarter totalled $144k

relating to the Executive Director salary, Non-Executive Director fees and payments to director- related entities for consulting services. This amount is included at Item 6.1 of the Appendix 4C. Refer to the Remuneration Report in the 2021 Annual Report for further details on director remuneration.

Operating expenditure: Cash outflows related to ongoing operating expenditures to run business

operations and deliver K2fly's platform of 9 solutions to clients which include the key items of: R&D, product manufacturing and operating costs, advertising and marketing, staff costs and administration and corporate costs. Net Cash from Operating Activities outflow was AU$1.2m (Section 1.9, Appendix 4C). Gross expenditure in the December quarter amounted to cash outflows of $4.0m (Section 1.2, Appendix 4C).

K2fly Limited ACN 125 345 502
www.k2fly.com|[e-mail]	[phone]	4/502 Hay Street Subiaco WA 6006