1H16 Results Presentation David Stewart CEO and Managing Director - PowerPoint PPT Presentation

19 February 2016 1H16 Results Presentation David Stewart – CEO and Managing Director Ken Sheridan – CFO and Executive Director

1H16 AT A GLANCE Executing to plan…  Another record result across all key metrics, with earnings mix continuing to evolve to M2M  Master Purchase Agreement for fixed wireless regional broadband solution signed with one of two largest USA based telecommunications carriers ... while pursuing and delivering long term growth opportunities  Ericsson/NBN contract rollout gaining pace  Global Fixed wireless regional broadband opportunities  Key partnerships, opportunities in key verticals and our custom solution approach  Well positioned to drive strong future growth 1

ACTIVELY PURSUING GROWTH OPPORTUNITIES

STRONG EARNINGS GROWTH DRIVEN BY ERICSSON/NBN CONTRACT  Revenue up 53.7% to $46.4m Key profit & loss items ($m) 1H16 1H15 Change  Substantial increase in revenue from Ericsson/NBN contract Revenue 46.40 30.20 53.7%  M2M business accounted for 67% of total sales (1H15: 44%) EBITDA 5.12 2.29 123.5%  EBITDA up 123.5% to $5.12m  After workforce and infrastructure Net profit after tax 2.32 0.36 538.9% reinvestment of $2m to enhance global capabilities in Fixed Wireless Regional Broadband and M2M Earnings per share 1.80 0.28 538.5% (cps)  Includes capitalisation of $2.1m of people related costs associated with US fixed EBITDA Margin wireless regional broadband contract win 11.0% 7.6% (%)  Net profit after tax up 538.9% to $2.32 million  Earnings per share up 538.5% to 1.80 cps 3

M2M REVENUE CONTINUES TO BUILD ($ millions)  Revenue composition continues to evolve… substantial increase in revenue from NTC’s Ericsson/NBN contract is expected to continue on growth trajectory  Base Business relatively stable… expected to be maintained at current level M2M Base Business Revenue split 31.2 14.0 14.7 17.7 15.8 15.2 Key M2M contracts 1H14 1H15 1H16 4

INVESTING IN M2M and RBB CAPABILITIES  Investments into our people and infrastructure are generally made a year ahead of revenue generation. 2H15 1H16 1H15 2H14 Engineers 44 56 61 80 Sales & 28 31 31 37 Marketing Other 19 18 18 20 5

SUBSTANTIALLY INCREASED EARNINGS EBITDA has continued to grow to $7.1m before investment in staff, skills and infrastructure Investment in staff & 2.0 infrastructure ($m) EBITDA ($m) 1.0 5.1 2.3 2.0 1H14 1H15 1H16 6

UTILISING BALANCE SHEET TO EXECUTE GROWTH STRATEGY Key balance sheet 31 Dec 30 Jun %  Cash down 42.4% to $1.96m reflecting items ($m) 2015 2015 change investments made to fund growth Cash and equivalents 1.96 3.40 -42.4% opportunities Other assets 50.09 41.04 21.7%  Increase in ‘Other assets’ driven by inventory Total assets 52.05 44.44 17.1% build-up as pace of sales growth continues Borrowings  11.76 3.35 251.0% Borrowings increased to $11.76m due to ramp up in scale and business investment for future Other liabilities 13.19 16.50 -20.1% growth Total liabilities 24.95 19.84 25.8% Total equity 27.10 24.60 10.2% Net debt (cash) 9.80 (0.05) 7

STRONG CASH FLOWS FROM OPERATIONS SUPPORT BUSINESS DEVELOPMENT Key cash flow items %  $4.27m cash used in operating activities ($m) 1H16 1H15 change reflecting increased levels of inventory and Net cash flows from costs incurred to obtain and fulfil USA fixed (4.27) 0.37 (1254.0%) operating activities wireless regional broadband contract  $5.58m cash used for investing activities; Net cash flows from (5.58) (2.51) 122.3% investing activities predominantly investments in people and infrastructure to develop new products and Net cash flows from 8.42 2.60 223.6% support long term growth financing activities  $8.42m cash from financing activities. Increase Net (decrease) / increase in bank borrowings to fund working capital 1.96 4.78 (59.0)% in cash 8

ERICSSON/NBN CONTRACT ROLLOUT GAINING PACE

FIXED WIRELESS RURAL BROADBAND 1H16 benefited from continued ramp up in the Ericsson/NBN contract rollout, with substantial future volume increases anticipated 10

ERICSSON/NBN RURAL BROADBAND ROLL-OUT Pace of installation of rural broadband devices is increasing 90,000 28.0% Premises Activated  Fixed wireless coverage increased by 74k 26.0% Take up rate premises since June 2015 to be at 343k 80,000 24.0% premises at 28 January 2016 70,000 22.0%  Fixed wireless take up rate increased from 18% 20.0% 60,000 at 30 June 2015 to be at 25% at 28 January 18.0% 2016 50,000 16.0% 14.0%  87k premises have activated fixed wireless 40,000 12.0% connections as at 28 January 2016 30,000 10.0% Source: NBN 11

THE GLOBAL OPPORTUNITY IN FIXED WIRELESS REGIONAL BROADBAND

FIXED WIRELESS REGIONAL BROADBAND IS A HUGE OPPORTUNITY $80 billion worldwide 13

OVUM RESEARCH: NBN RURAL BROADBAND BEST IN WORLD Ovum’s Global Comparison of Fixed Wireless Rural Broadband concluded: • NBN’s fixed wireless product outperforms international peers across a range of metrics. • The NBN product is technically superior to its peers. • NBN’s fixed wireless products are made available at affordable prices Source: Ovum Fixed Wireless Broadband: A Global Comparison 10 July 2015 14

NETCOMM WIRELESS HAS THE EXPERTISE IN FIXED WIRELESS A “compelling event”: PSTN (copper line) shut down  Carriers around the world have indicated that they are going to shut down the use of copper lines - this impacts fixed line (ADSL) broadband  The standard replacement is fibre in “built up areas” which cover 90% of customers  For the remaining 10%, being regional and rural customers, Boston Consulting Group concludes that fixed wireless is the best solution  Carriers to announce a plan to shut down their copper networks include AT&T and Verizon in the USA NTC’s expertise gained in delivering the Ericsson/NBN rural broadband solution is being sought after to address the “last 10%” We are leveraging our experience gained in our local market to provide services to international markets 15

MAJOR FIXED WIRELESS CONTRACT WIN IN USA DURING 1H 2016 Master Purchase Agreement signed with one of the two largest USA based telecommunications carriers  Agreement to supply fixed-wireless devices required to connect households and businesses to a fixed- wireless rural broadband network which will be build by that carrier  A key milestone in NTC’s global growth strategy for regional broadband  Building on the success to date with Ericsson where we are delivering a similar service to Australia’s National Broadband Network 16

ACTIVELY PURSUING GROWTH OPPORTUNITIES

A CONSISTENT OVERARCHING STRATEGY DRIVES NETCOMM WIRELESS’ SUCCESS Growing our strategic Maintaining our culture Delivering custom partnerships of innovation solutions 18

FIXED WIRELESS REGIONAL BROADBAND OPPORTUNITIES Actively pursuing “substantial” regional broadband opportunities globally • Significant focus on North America and Europe • Projects involve “substantial” volumes and leverage off our demonstrated expertise from the Ericsson/NBN contract • Recent Master Purchase Agreement with a large USA based telco highlights NTC’s strong global market position 19

M2M BUSINESS Global opportunities • We continue to actively pursue M2M contracts globally with particular emphasis on USA, Europe, Middle East, Australia and Japan • Continue to pursue specific vertical sectors where we see the greatest opportunity, avoiding crowded markets • Targeting high volume opportunities where customers require a customised device • Our “coat - tail” partnerships are critical 20

OTHER SIGNIFICANT GROWTH OPPORTUNITIES FTTdp and CableTTdp for Network Operators • With the replacement of copper networks with fibre and HFC cable, there is a large opportunity to deploy Fibre To The Distribution Point (“FTTdp”) and Cable to the Distribution Point (“CTTdp”). This requires a device that “connects” fibre or cable which is deployed down a street to the copper line that enters the customers premises. • This type of technology provides high speed connectivity at an affordable price and can be deployed much faster than fibre all the way to the home. • NBN currently has a tender process underway in respect of FTTdp. • These are large volume global opportunities. 21

OTHER SIGNIFICANT GROWTH OPPORTUNITIES Technology refresh opportunities • With the rollout of NBN, all ADSL devices will be replaced. Over 8.5 million devices. • Great opportunity for NTC’s VDSL2 devices which have been “field proven” in NZ 22

2015 Awards - Leading innovation for the fourth year running 22

WELL POSITIONED TO DRIVE STRONG FUTURE GROWTH

KEY PRIORITIES FOR 2H16  Focus on Fixed Wireless Regional Broadband sector both internationally and locally where NTC has a world leading position and demonstrable expertise  Obtain formal technical approval in respect of the new USA fixed wireless contract  Deliver additional revenues from growing Ericsson/NBN fixed wireless demand  Continue to build partnerships with key industry and telco players  Deliver new products from Engineering pipeline, with applicability to overseas markets  Grow M2M revenues in overseas markets - key focus on USA, Europe, Middle East and Japan 25