ADB Group FY 2011 Results Zurich, 22 February 2012 This - - PowerPoint PPT Presentation

ADB Group FY 2011 Results

Zurich, 22 February 2012

This presentation contains forward-looking statements. You are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those in the forward-looking statements as a result of various factors. Advanced Digital Broadcast Holdings SA undertakes no obligation to publicly update or revise any forward-looking statements. Advanced Digital Broadcast Holdings SA reserves the right to amend the information at any time without prior notice. The information contained in this presentation may not be considered as being a

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substitute for economic, legal, tax or other advice and you are cautioned to base investment decisions or other decisions on the content of this presentation. You are recommended to consult your investment advisers or other advisers prior to making any decision. This presentation is not an offer of securities for sale nor a solicitation to invest in Advanced Digital Broadcast Holdings SA securities. In particular, it is not an offer of securities for sale in the United States of America, its territories and possessions. Securities may not be offered or sold in the United States absent registration or an exemption from registration under the U.S. Securities Act of 1933, as amended. Advanced Digital Broadcast Holdings S.A. does not intend to register its securities in the United States of America.

Andrew Rybicki, Chairman and CEO Alessandro Brenna, CFO Tina Nyfors, SVP IR/Group Communications

2011 in brief

A tough market – with some good news

Persisting unfavorable macroeconomic conditions in Europe made the business truly tough Slow transition to digital TV in Taiwan and poor market in India – a disappointment Flood in Thailand a major disturbance for up-coming 2012 business HDTV moves into commercial areas in the U.S. – a very promising business

ADB Group 2011 business in two statements

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HDTV moves into commercial areas in the U.S. – a very promising business

A very challenging year for ADB organization

A change of company strategic direction and new business model on-going Staff mindset and attitude change slow, but clearly visible Changes in top managment an unwanted disturbance Integration with former PBS slower and more costly than anticipated A number of corrective actions taken and largely completed

Stress on Core Values Strategy and Business Model Change Cutting Unprofitable Ventures and Businesses

Transformation of ADB Group

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Integration and Reorganization for Efficiency Building on Synergies Expansion of Well Performing Businesses

ADB Group Core Values Technology Innovation Product Performance

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Teamwork Quality and Efficiency

Strategy and Business Model Change

Focus on complete systems solutions Focus on profitable and high margin products and services Capitalize on our innovative software and engineering services Focus on Intellectual Property: maximize in-house software development, minimize purchases

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Focus on Intellectual Property: maximize in-house software development, minimize purchases Thrive for a superior quality and turn it into a saleable product Replace OEM with ODM – minimize in-house hardware design and raw materials purchase Prioritize margins, not revenue growth

Pruning Unprofitable Activities

Elimination of unprofitable businesses and operations

Shut-down of UK retail DTT business Substantial (80%) scaling-down of Italian DTT distribution business Shut-down of Spain and UK sales offices and refocus of Asia-Pac presence Status: largely done

Writing-off slow-moving inventory and engineering projects - Completed

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Writing-off slow-moving inventory and engineering projects - Completed

F/G and raw materials (mainly DTT) write-down:

• $6.4M

Cancelled engineering projects and write-offs:

• $4.1M

Eliminating excessive IP licensing charges - Ongoing process

Re-negotiated IPR licensing contracts Legally challenging 3rd party patents validity and/or applicability Overall annual savings in 2012 and beyond: more than $3M

Reorganization & Cost Reduction

Organizational structure: includes the acquired companies Five Business Division (completed) Broadcast US Cable Broadband (former PBS) Systems Services

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Five Central Functions Departments (completed) Continuous O/H cost reduction: approximately 11%*

* Jan – Dec 2011 run rate reduction

Strategy & Technology Finance, Legal & IPR Operations & Procurement HR & Admin Quality & Reliability

New ADB Organization

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Broadband Division Broadcast Division Services Division US Cable Division Systems Division

Shared resources and processes

Building on Synergies

Organization: integration & elimination of overlaps

Five Integrated Central Functions: - Strategy & Technology - Operations - Quality – Finance/Legal/IP – HR & Admin IT process and tools - Communication, Business & Production Planning Tools, Financial Tools (Navision, EBOS), HR tools (HROS) Status: 50% done

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Markets, Business, Products: cross-divisional development & sales

ADBB products for ADB cable TV markets: gateways Geographical expansion of ADBB business: gateways for USA ADB products for ADBB markets: IPTV for telcos Combined ADBB and ADB software & systems products for all markets: Carbo and Epicentro Status: < 20% of full potential - Huge future potential

Expansion – 1

Expansion of well performing businesses Boost for the Broadcast Division

Large new customers in Scandinavia, incl. a long-term technology partnership agreement

Take-off of US Cable: delivery of products to N2 and N4 largest operators

2011 business growing from $0.2M to more than $4M

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2011 business growing from $0.2M to more than $4M

Boost for the Services Division: new facility in Poland

2011 business growth: +59% Long-term partnership with Group’s No. 1 customer

Creation of System & Software Division: the future of ADB Group business

Expansion – 2

Quality, Engineering and B2B Marketing

Creation of the Group-wide Total Quality Organization

A must for the future success Direct contributes to overall business by minimizing cost of non- quality

Creation of the cross-divisional Product Technology Group

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Creation of the cross-divisional Product Technology Group

cross-divisional use of engineering skills and development efforts re-usability of engineering designs

Marketing re-organization

centralized B2B Strategic Marketing significant reduction of consumer-oriented marketing activities expansion of Divisions’ Product Marketing

Key figures of 2011

$ million - except EPS

2011 2010 Revenue 399.0 356.6 Gross profit 124.0 31.1% 114.7 32.2% EBIT before 7.6 1.9% 17.7 5.0%

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Reorganization + acquisition (16.3) (0.5) EBIT (8.7) (2.2)% 17.2 4.8% Net profit after tax (12.2) (3.1)% 12.9 3.6% EPS (basic) $(2.27) $2.55 Net cash + treasury investments 28.9 31.6

Business review

Andrew Rybicki, Group CEO

FY2011 Top Ten Customers - in alphabetical order

ITI Neovision Eurocom Swisscom Canal Digital Satellite, Israel Satellite, Poland Broadband, Switzerland Satellite, Norway

70%

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Vectra Telekom Austria Telecom Italia Telenet Telefonica ZAP B-band & IPTV, Austria Broadband, Italy Cable, Belgium IPTV, Spain Terrestrial & Satellite, Italy Cable, Poland

70%

• f

Group revenue in 2011

Top customer business brought by the acquisition

Customer name (alphabetical order) Country Fastweb Italy Swisscom Switzerland Telecom Argentina Argentina Telekom Austria Austria

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Telekom Austria Austria Telecom Italia Italy Telefonica Spain Vodafone D2 Germany Vodafone Italia Italy

ADB Group total revenue by geography

Americas Eastern Europe 22%

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Americas 6% Asia Pacific 1% MEA 5% Western Europe 66%

ADB Group revenue by product/service family

Broadband

Customer care and other services 10%

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Digital TV equipment 58% Broadband equipment

32%

ADB Group worldwide business split

30% 40% 50% 60%

Western Europe

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0% 10% 20% 30% Digital TV equipment Gateways Customer care & services

Western Europe Eastern Europe MEA Americas Asia-Pcific

Financial review Alessandro Brenna

Profit and loss statement

$ million - excluding EPS

2011 2010 Revenue 399.0 356.6 Gross profit 124.0 114.7 Gross margin% 31.1% 32.2% R&D (68.6) (48.9) SG&A (48.8) (43.7) Other 1.0 (4.4)

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EBIT before reorganization + acquis. 7.6 17.7 EBIT% 1.9% 5.0% Reorganization + acquisition charges (16.3) (0.5) EBIT (8.7) 17.2 Financial costs, net (4.8) (2.4) Profit before tax (13.5) 14.8 Taxes 1.3 (1.9) Net profit (12.2) 12.9 Profit % (3.1)% 3.6% EPS (basic) $ (2.27) $ 2.55

Key balance sheet items

$ million

2011 2010 Cash and cash equivalents 42.3 84.5 Treasury investments 14.3 14.5 Trade receivables, net 52.8 92.8 Inventories, net 29.6 50.4 Other current assets 21.3 28.1 Total current assets 160.3 270.3

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Current bank liabilities 14.4 64.5 Trade and other payables 107.2 144.4 Accrued expenses 23.3 34.5 Total current liabilities 161.8 263.0 Long-term bank loans 13.4 2.9 Equity 52.0 68.7 Net cash + treasury investments 28.9 31.6

Key cash flow items

$ million

2011 2010 Net profit for the period (12.2) 12.9 Adjustments, net 49.5 26.8 Working capital changes 11.8 (12.4) Interest and taxes paid (5.2) (6.9) Net cash flow from operations 43.9 20.4 Sale of treasury investments + time deposits 0.1 19.8

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Net investment in operations (34.1) (25.3) Payment for acquisition of business (0.8) (8.6) Net cash flow used in investing (34.8) (14.1) Net share purchase + dividend payment (11.3) (21.3) (Decrease) increase in bank loans (39.6) 34.9 Net cash flow used in (generated by) financing (50.9) 13.6 Translation adjustment on foreign currency (0.4) (0.8) Net (decrease) increase in cash (42.2) 19.1 Ending cash + treasury investments 56.6 99.0

Industry overview, market trends and strategy

Pay TV is not dead – it will expand and merge with broadband, internet, mobile, etc. It will become a ”pay content” A “box” will not disappear – it will evolve and take new shapes (as it used to do for the past 60 years) “Content” will be available on many screens throughout the home – it already is, but in a very messy way. An opportunity.

Key drivers of ADB Group future business

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“Content” will become a “super-content” , by including into itself various services (energy, security, health care, self-generated, etc.) Software and system integration technologies will rule supreme, while the hardware will go into silicon chips Skills of putting it all together and managing it will fetch the highest price Therefore, there is plenty of room for companies driven by innovation, superior integration and software skills, and quality of their work

Few figures…

Pay -TV is today in more than 56% of European homes** Average consumer spends on pay-TV more than 50% of his/her

• verall media spending**

All this generates today over 30 billion euro in revenues:

IPTV DSL 2.5

IPTV FTTx

0.16

DTT

0.6

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Cable 10.7

Satellite

16.3

European Pay-TV Revenues €bn

** Source: Source: Screen Digest 2011

More figures…

Broadband is now in more than 70% of European homes – and it is growing ** The sales of key connectivity devices – the gateway, a faithful industry workhorse – will generate worldwide 10 billion euro in 2015 ***. Some of them are low margin business. But… The sales of a Multimedia Gateway – the new race horse – will go from 0 in 2010 to 4 million units by 2015**

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*Source: Dataxis, 2011 **Source: Source: Screen Digest 2011 ***Source: In-stat 2011

Multimedia Gateway comes in a form of a “gateway” or a “set-top box” - yet another “BOX” - ☺ ☺ ☺ ☺! But it is not just about a BOX…

A challenge – and a business It is about CONNECTIVITY and SYSTEM INTEGRATION

Any box to any box Any fixed box to any mobile box Any box to any computing device – mobile and not… And even to air-conditioning, heating, security camera,

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And even to air-conditioning, heating, security camera, personal health monitoring device, etc, etc. In short, anything connecting to anything. Transmitting and receiving ANYTHING and EVERYTHING.

Challenge enough? Business enough? We think so. How will we do it?

HOME HOME HOME HOME

We will put a ”devices - filled home” in order, and offer the operator a complete service platform

Easy Connection Top Performance Full Service

• 2. We will become a

Home Service Platform

• 3. We will

simplify it all

for the end-user

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Easy Installation Easy Management Great user experience

Platform

1. We will deliver the best

Connected Home - Devices & Service

Internet

SERVICES EXPOSURE

Un-managed apps (data capped) Third Parties services and apps

Pay-TV, Broadband VoiP and other Operators

We have all what is needed to make it happen

Easy Connection Top Performance Great user experience

Power line High speed Gateways Hybrid DVRs Smart beam forming Carbo™ User Experience Media sharing PushVOD Multi-room DVR

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Self-installing kit: IPTV set-top + broadband gateway

Easy Installation Easy Management

Power line adapters

Full Service

Live software upgrade Wireless video bridges 3G Femtocells Life software upgrades Asset tracking Screening, Repair, Refurbishment Technical support TR-069 Remote Management On-screen invoicing Apps management portal

So we will offer a Fully Connected Home Solution, and sell COMPLETE SOLUTIONS – not just devices

content via content via

Consumer home

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via broadcast via broadband Operators (IPTV, cable, satellite, internet, other) New ADB Group solutions

Lastly - ADB and the myth of Internet TV threat

Internet TV is not ”coming” – it’s already here It’s not a threat for ADB – it’s an opportunity So-called ”connected TV” does not connect to “internet at large” – it connects to a hub (Sony, Apple, Google, Samsung, etc.) Why not to – or through – the ADB’s?

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Future “connected TV” will need a sophisticated “software box” inside it, to connect it to other devices (mobile and otherwise) Who will make it? Why not ADB? Various research firms estimate a number of connected TVs to grow to some 600 million worldwide by 2016. So they say. Whatever the numbers – they are BIG numbers. And so are the

• pportunities for ADB to be included into them.

Through various software products – not through making TVs

Outlook Andrew Rybicki

Company vision for 2012 and beyond Connectivity, software, systems… Connectivity, software, systems… Connectivity, software, systems… Connectivity, software, systems…

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Connectivity, software, systems… Connectivity, software, systems… Connectivity, software, systems… Connectivity, software, systems… Connectivity, software, systems.

Year 2012 Goals in Summary

Development of new business models & strategic goals

Contribution margin & cash generation vs. revenue growth Services, software & systems vs. volume consumer products Quality and Reliability as a Product

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Quality and Reliability as a Product Outsourcing: ODM vs. OEM model Continued overheads cost reduction through automation,

• utsourcing and simplification of working methods and

procedures Return to the dividend payment policy

Thank you

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Thank you