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

1

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

ACTIVELY PURSUING GROWTH OPPORTUNITIES

• Revenue up 53.7% to $46.4m
• Substantial increase in revenue from

Ericsson/NBN contract

• M2M business accounted for 67% of total

sales (1H15: 44%)

• EBITDA up 123.5% to $5.12m
• After workforce and infrastructure

reinvestment of $2m to enhance global capabilities in Fixed Wireless Regional Broadband and M2M

• Includes capitalisation of $2.1m of people

related costs associated with US fixed wireless regional broadband contract win

• Net profit after tax up 538.9% to $2.32 million
• Earnings per share up 538.5% to 1.80 cps

3

STRONG EARNINGS GROWTH DRIVEN BY ERICSSON/NBN CONTRACT

Key profit & loss items ($m) 1H16 1H15 Change Revenue 46.40 30.20 53.7% EBITDA 5.12 2.29 123.5% Net profit after tax 2.32 0.36 538.9% Earnings per share (cps) 1.80 0.28 538.5% EBITDA Margin (%) 11.0% 7.6%

4

M2M REVENUE CONTINUES TO BUILD ($ millions)

Revenue split Key M2M contracts

• 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

15.8 17.7 15.2 14.7 14.0 31.2 1H14 1H15 1H16 M2M Base Business

INVESTING IN M2M and RBB CAPABILITIES

• Investments into our people and infrastructure are generally made a year ahead of revenue

generation.

5 2H14 1H15

Engineers Sales & Marketing Other

44 56 28 31 19 18 2H15 61 31 18 1H16 80 37 20

SUBSTANTIALLY INCREASED EARNINGS

EBITDA has continued to grow to $7.1m before investment in staff, skills and infrastructure

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2.0 2.3 5.1 1.0 2.0 1H14 1H15 1H16 Investment in staff & infrastructure ($m) EBITDA ($m)

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UTILISING BALANCE SHEET TO EXECUTE GROWTH STRATEGY

Key balance sheet items ($m) 31 Dec 2015 30 Jun 2015 % change

Cash and equivalents 1.96 3.40

• 42.4%

Other assets 50.09 41.04 21.7%

Total assets 52.05 44.44 17.1%

Borrowings 11.76 3.35 251.0% Other liabilities 13.19 16.50

• 20.1%

Total liabilities 24.95 19.84 25.8% Total equity 27.10 24.60 10.2%

Net debt (cash) 9.80 (0.05)

• Cash down 42.4% to $1.96m reflecting

investments made to fund growth

• pportunities
• Increase in ‘Other assets’ driven by inventory

build-up as pace of sales growth continues

• Borrowings increased to $11.76m due to ramp

up in scale and business investment for future growth

• $4.27m cash used in operating activities

reflecting increased levels of inventory and costs incurred to obtain and fulfil USA fixed wireless regional broadband contract

• $5.58m cash used for investing activities;

predominantly investments in people and infrastructure to develop new products and support long term growth

• $8.42m cash from financing activities. Increase

in bank borrowings to fund working capital

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STRONG CASH FLOWS FROM OPERATIONS SUPPORT BUSINESS DEVELOPMENT

Key cash flow items ($m) 1H16 1H15 % change Net cash flows from

• perating activities

(4.27) 0.37 (1254.0%) Net cash flows from investing activities (5.58) (2.51) 122.3% Net cash flows from financing activities 8.42 2.60 223.6% Net (decrease) / increase in cash 1.96 4.78 (59.0)%

ERICSSON/NBN CONTRACT ROLLOUT GAINING PACE

FIXED WIRELESS RURAL BROADBAND

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

ERICSSON/NBN RURAL BROADBAND ROLL-OUT

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Pace of installation of rural broadband devices is increasing

• Fixed wireless coverage increased by 74k

premises since June 2015 to be at 343k premises at 28 January 2016

• Fixed wireless take up rate increased from 18%

at 30 June 2015 to be at 25% at 28 January 2016

• 87k premises have activated fixed wireless

connections as at 28 January 2016 Source: NBN

Premises Activated Take up rate

THE GLOBAL OPPORTUNITY IN FIXED WIRELESS REGIONAL BROADBAND

$80 billion

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FIXED WIRELESS REGIONAL BROADBAND IS A HUGE OPPORTUNITY

worldwide

OVUM RESEARCH: NBN RURAL BROADBAND BEST IN WORLD

14

Ovum’s Global Comparison of Fixed Wireless Rural Broadband concluded:

• NBN’s fixed wireless product
• utperforms 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

NETCOMM WIRELESS HAS THE EXPERTISE IN FIXED WIRELESS

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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

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

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ACTIVELY PURSUING GROWTH OPPORTUNITIES

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

• f innovation

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FIXED WIRELESS REGIONAL BROADBAND OPPORTUNITIES

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Actively pursuing “substantial” regional broadband

• pportunities 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

M2M BUSINESS

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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

21

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
• pportunity 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.

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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

2015 Awards - Leading innovation for the fourth year running

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WELL POSITIONED TO DRIVE STRONG FUTURE GROWTH

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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

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SUMMARY

• Another record half-year result delivered across all key metrics
• Increasing investment in people and infrastructure to underpin

long term growth

• Master purchase agreement signed with one of two largest US telcos

for fixed wireless regional broadband solution

• Increasing pace of Ericsson/NBN contract rollout
• Pursuing multiple attractive fixed wireless growth opportunities
• Well placed to continue growing:
• With ramp-up of Ericsson/NBN contract rollout
• FY17: further ramp-up of Ericsson/NBN contract rollout and start
• f US regional broadband revenues + new contract wins