M A R C H 2 0 1 9 Investor Presentation
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SAFE HARBOR Some of the statements in this presentation are or may be ‘‘forward-looking statements,” including our statements about sales opportunities, expanding utilization of next-generation technology in our products and services, investments and expansion in our fiber network, growth in higher margin recurring revenue, identification of future opportunities, population growth, geographic expansion, deployment of new services and future investments in people and platforms. These forward- looking statements are subject to risks, uncertainties and other factors, such as an economic downturn in the geographic markets where we operate, volatile financial markets, regulatory changes and strong competition, any of which could cause actual results to differ materially from future results expressed or implied by those forward-looking statements. Although we believe that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove to be inaccurate. Therefore, we can give no assurance that the results contemplated in the forward-looking statements will be realized. The inclusion of forward-looking information should not be construed as a representation by us that our plans or expectations will be achieved. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. I N V E S T O R P R E S E N T A T I O N 3
CORPORATE OVERVIEW R E V E N U E M I X $82.0 $79.0 $76.9 $49.3 $44.1 $42.3 FY 2016* FY 2017* FY 2018* IT Services & Hardware Internet & Communications All numbers in millions. * * FY 2016 and FY 2017 numbers are audited. FY 2018 numbers are unaudited. I N V E S T O R P R E S E N T A T I O N 4
ONGOING TRANSFORMATION • Communications industry impacted by technological advancement, market shifts and regulatory changes • NorthState shifting from legacy business and products to fiber-based Internet and data services, infrastructure, IT services, cybersecurity, and unified communications services • Long history of success and service in the technology space I N V E S T O R P R E S E N T A T I O N 5
LEADERSHIP TEAM Experienced executive team positioning NorthState to stay ahead in the dynamic communications landscape I N V E S T O R P R E S E N T A T I O N 6
NORTHSTATE TODAY 73% of Net Operating Strategic revenue comprises Revenue I N V E S T O R P R E S E N T A T I O N 7
REFINING OUR STRATEGY FY 2018 Revenue Mix by Customer Segment 33% 67% Business Residential I N V E S T O R P R E S E N T A T I O N 8
VALUE PROPOSITION At NorthState Technology Solutions, we help our customers achieve better business outcomes by providing industry-leading secure IT and data center solutions designed specifically for their use. We focus on what we can help them achieve through effective IT. W H O W E A R E W H A T W E D O W H Y U S ? Technology Business Security Reliability People Customers Partners & Outcomes Ecosystem Guaranteed You the Company Customer Expertise Our ur a approach h Technology Te y Our ur e exp xper erienc ience e as assuran ance e I N V E S T O R P R E S E N T A T I O N 9
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KEY TECHNOLOGY PARTNERS C E R T I F I C A T I O N S NorthState holds 30 + IT and technical certifications. I N V E S T O R P R E S E N T A T I O N 1 1
IT SERVICES & HARDWARE 4 Southeastern U.S. & International U.S. Data Centers Operations Centers I N V E S T O R P R E S E N T A T I O N 1 2
INTERNET & COMMUNICATIONS I N V E S T O R P R E S E N T A T I O N 1 3
FIBER INVESTMENT H I G H L I G H T S $130 million investment in growing fiber • footprint over past 11 years • Working to foster and match growth of the Piedmont Triad Region of North Carolina Plans to continue to expand fiber in current • footprint • Plans for additional $5-10 million investment in next two years to increase footprint • Evaluate expanded wholesale opportunities with our fiber network Strong emphasis on growing connections • for small and mid-size businesses with our fiber network I N V E S T O R P R E S E N T A T I O N 1 4
STRATEGIC FOCUS I N V E S T O R P R E S E N T A T I O N 1 5
KEY FINANCIAL INFORMATION FY 2016* FY 2017* FY 2018* H I G H L I G H T S : Net Operating $119.3 $123.0 $131.3 Revenue (NOR) • Business revenue comprises 67% of NOR 33% 33% 33% 33% 34% 34% By Customer • Residential revenue up 8% Segment 66% 66% 67% 67% 67% 67% since 2016 • IT Services & Hardware comprises 38% of NOR • Internet & Communications revenue up 7% since 2016 36% 35% 38% By Product 62% 64% 65% Segment All numbers in millions. I N V E S T O R P R E S E N T A T I O N 1 6 * FY 2016 and FY 2017 numbers are audited. FY 2018 numbers are unaudited. *
FINANCIAL GUIDANCE F Y 2 0 1 8 F Y 2 0 1 9 U N A U D I T E D T A R G E T S 2 Net Operating Revenue ~ $147.5 M $131.3M Operating Income $6.3 M ~ $9.3 M EPS $3.32 ~ $3.96 EBITDA 1 $30.9 M ~ $31.9 M Capital Expenditures $16.9 M ~ $19.1 M All numbers in millions except EPS. I N V E S T O R P R E S E N T A T I O N 1 7 1,2 – See footnotes page in addendum for important definitions and disclaimers related to information on this page.
INVESTMENT HIGHLIGHTS 1 – See footnotes page in addendum for important definitions and I N V E S T O R P R E S E N T A T I O N 1 8 disclaimers related to information on this page.
FINANCIAL FOOTNOTES AND DISCLAIMERS 1. See Non-GAAP Financials Measures Disclaimer below. 2. See Financial Target Forward-Looking Statement Disclaimer below. NON-G NO -GAAP F FIN INANCIA CIAL M MEASURES D DIS ISCL CLAIM IMER: : EBITDA and EBITDA margin are non-GAAP financial measures. Non-GAAP EBITDA is calculated using GAAP net income plus adding the following GAAP items: interest expense, income taxes, depreciation and amortization and distributions from unconsolidated entities, while subtracting equity in earnings of unconsolidated entities. Non-GAAP EBITDA Margin is Non-GAAP EBITDA divided by GAAP Net Operating Revenue. Management uses non-GAAP EBITDA and EBITDA Margin in its internal analysis as a consistent measure for comparing NorthState’s financial performance to previous financial results. Management believes non-GAAP EBITDA and EBITDA Margin is useful to investors and other users of our financial statements in evaluating operating performance because it provides them with an additional tool to compare business performance across periods. The presentation of non-GAAP EBITDA and EBITDA Margin is intended to complement, and should not be considered an alternative to, the presentation of GAAP financial metrics. In addition, non-GAAP EBITDA and EBITDA Margin as presented in this release may not be comparable to similarly titled measures used by other companies. FIN INANCIA CIAL T TARGET F FORWARD-L -LOOKIN ING S STATEMENT D DIS ISCL CLAIM IMER: : These are not budget estimates or projections; they are targets, they are forward-looking and are inherently subject to significant factors such as industry performance, general business, economic, regulatory, market and financial conditions, as well as changes to the business, financial condition or results of our operations, including the factors described in the opening slide entitled “SAFE HARBOR,” which factors may change and cause the targets to be inaccurate. The targets do not take into account any factual circumstances or events occurring after the date the presentation was prepared. Readers are cautioned not to place undue reliance on the targets. Actual future results may materially differ from these targets. The targets are not a representation or warranty by us or any other person as to the accuracy of the targets or that they will be realized as stated in this presentation. NorthState undertakes no duty to update its targets. In addition, we do not intend to publicly announce at any time in the future any confirmation or comparison of NorthState’s actual performance with the targets. I N V E S T O R P R E S E N T A T I O N 1 9
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