RTX PRESENTATION Q1 2019/20 Presentation by CEO Peter Rpke CFO - - PowerPoint PPT Presentation

RTX PRESENTATION Q1 2019/20

COPENHAGEN I 24 JANUARY 2019

Presentation by CEO Peter Røpke CFO Morten Axel Petersen

DISCLAIMER

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This presentation contains statements regarding expectations for the future development of RTX A/S, in particular the direction of future product development, future sales, operating profits and business expansion. Such statements are subject to risks and uncertainties as various factors, many of which are outside the control of RTX, may cause the actual development and results to differ materially from the expectations expressed directly or indirectly in this presentation. Factors that might affect such expectations include, among others, rapid technological changes and evolving markets,

• verall economic and business conditions, fluctuations in currencies, demand for RTX’s services, competitive factors in

the market and uncertainties concerning possible investments.

January 2020

STRENGTH PROFILE

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RTX has a:

• Sustained focus on shareholder value - CFFO invested in value creation or paid back to the shareholders.
• Leverage opportunity within the current business setup.
• Proven ability to develop, innovate and manufacture customized solutions.
• Market-leading position in wireless solutions.
• High profitability, that can be maintained with the right product mix.
• Solid business model with high degree of recurring revenue from loyal customers.
• Dedicated growth strategy – unleashing wireless wisdom through selected B2B target markets.
• Track record of profitable growth, consistently sustained for many years.

January 2020

AGENDA

• 1. Recap: RTX Business Model
• 2. Business and Financial Update Q1 2019/20
• 3. Outlook and Long-Term Ambitions
• 4. Q&A Session

Appendix: RTX Growth Strategy

4

Peter Røp øpke President & CEO Mor

• rten Axel

l Petersen CFO

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RECAP: RTX BUSINESS MODEL

January 2020

59 70 77 83 100 14/1 4/15 15/1 5/16 16/1 6/17 17/1 7/18 18/1 8/19

RTX is a global company with +25 years of extensive experience and knowledge in designing and manufacturing advanced wireless short-range radio systems and

• products. Our heritage has provided us with a unique combination of software

and hardware capabilities which RTX leverages with globally recognized customers, from conceptualization to finished products and modules.

RTX AT A GLANCE: SUSTAINED PROFITABLE GROWTH

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1993 +1,000 289

Founded in 1993 and headquarter in Denmark Projects completed since 1993 FTEs at 30 September, 2019 Units of products and modules delivered in 2018/19

+6.8m

KEY RTX FACTS

350 396 434 475 560 14/1 4/15 15/1 5/16 16/1 6/17 17/1 7/18 18/1 8/19

5-YEAR REVENUE GROWTH

DKK million

5-YEAR EBITDA GROWTH 5-YEAR EBIT GROWTH

DKK million DKK million

52 66 72 75 87 14/1 4/15 15/1 5/16 16/1 6/17 17/1 7/18 18/1 8/19

CAGR 12.5% CAGR 14.2% CAGR 13.5%

January 2020

WHAT WE DO

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Enterprise

In the Enterprise segment, RTX designs, develops, and supplies wireless IP telephony solutions used in communication systems for professional use, e.g. in office environments, call centers, retail or storage facilities etc. The wireless IP telephony solutions are supplied on both an ODM and an OEM basis.

B2B Headsets

As an Enterprise adjacency expansion, the RTX ODM/OEM headset offering for call centers, office environment, retail and storage facilities consist of several different models supporting customer demand for high quality and deep integration across the Enterprise space.

ProAudio

With years of experience in ProAudio design, development and manufacturing, RTX has gained the expertise to deliver incredible sound quality in high-density RF environments as well as in challenging radio environments with a high degree

• f interference. Offering includes both

dedicated RTX modules and custom ODM/OEM products.

Healthcare

In the Healthcare segment, RTX is primarily involved in the development, design and supply of wireless modules and products used for continuous patient monitoring in hospitals. Additionally, RTX is involved in the design of wireless solutions for projects in assisted living such as hearing and accessories.

January 2020

RTX BUSINESS MODEL FOR CONTINUED PROFITABLE GROWTH

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Core capabilities Deployment in attractive B2B target markets Leverage effect for profitable growth

DEVELOPMENT PHASE RAMP PHASE MAIN PHASE END OF LIFE REPLACEMENT PRODUCT

NRE Revenue ODM/OEM Revenue

YEAR 1 YEAR 2 YEAR 4 YEAR 5 YEAR 6 YEAR 7 YEAR 8

Revenue Engineering Effort

ODM MODEL OPERATED VIA FRAMEWORK AGREEMENTS WITH HIGH “STICKINESS” OF RECURRING REVENUE

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ILLUSTRATIVE RTX BUSINESS CASE BY PRODUCT LIFE CYCLE – FOR ONE COMBINATION OF PRODUCT AND CUSTOMER

Effort and Revenue Start-up for replacement product Years

YEAR 3

WHO WE WORK FOR

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BUSINESS AND FINANCIAL UPDATE Q1 2019/20

January 2020

• Satisfactory Q1 revenue and earnings, in line with plan - especially the

Enterprise segment in Business Communications performing well

• Design Services’ revenues from the ProAudio and Healthcare target segments

are marginally below last year due to lower engineering (NRE) revenues, not fully compensated by higher revenue from product sales and royalties, as the unit’s resources focus increasingly on creating long-term recurring revenues.

• Continues strategic development towards more larger framework agrements

and lower share of business with smaller customers…

• …and development towards higher share of revenues from recurring revenues

from product sales and royalties

BUSINESS UPDATE Q1 2019/20

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SEVEN FRAMEWORK AGREEMENTS IN VARIOUS LIFE CYCLE STAGES

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“Older” / “legacy” framework agreements Framework agreements announced during 2017/18 Framework agreements announced Q4 2018/19 DEVELOPMENT PHASE

• 6. ProAudio
• 7. Enterprise

PROLONGATION/RENEWAL MAIN PHASE RAMP PHASE

• 4. Enterprise (headset)
• 5. Enterprise
• 1. Enterprise
• 2. Enterprise
• 3. Enterprise

Reasonably stable customer forecasts from established customers; some, but lower, quarter-on-quarter fluctuations in product sales Customer forecasts not yet stable in ramp phase; quarter-

• n-quarter fluctuations in

product sales No product sales in development phase (some NRE revenue)

Note: The life cycle stage will vary for individual products for the same customer, the above is therefore an approximation for the “average” life cycle stage for each framework agreement

14

GROUP FINANCIAL HIGHLIGHTS Q1 2019/20

REVENUE

14 DKKm

EB EBITDA

DKKm

Q1 1 15 15/1 /16 Q1 1 16 16/1 /17 Q1 1 17 17/1 /18 Q1 1 18 18/1 /19 Q1 1 19 19/2 /20 3 6 9 12 15 18

EB EBIT

DKKm

DKK 128m

REVENUE

DKK 21m

EBITDA EBIT

71%

EQUITY RATIO

16.7%

EBITDA-MARGIN

DKK 16m

Q1 1 15 15/1 /16 Q1 1 16 16/1 /17 Q1 1 17 17/1 /18 Q1 1 18 18/1 /19 Q1 1 19 19/2 /20 20 40 60 80 100 120 140 Q1 1 15 15/1 /16 Q1 1 16 16/1 /17 Q1 1 17 17/1 /18 Q1 1 18 18/1 /19 Q1 1 19 19/2 /20 5 10 15 20 25

DKK 6.5m

CFFO

+10% +102% +109%

GROUP P&L Q1 2019/20

15

DKK million Q1 19/20 Q1 18/19

Revenue 128.3 116.4 Cost of sale

• 52.8
• 49.7

Gross profit 75.5 66.7

Gross margin. % 58.9% 57.3%

Other external cost

• 14.4
• 16.7

Staff cost

• 46.6
• 43.4

Value of own work transferred to assets 6.9 4.0 EBITDA 21.4 10.6 Depreciation and amortization

• 5.1
• 2.8

Operating Profit (EBIT) 16.3 7.8

• Net

Net rev evenue increased by 10.2% in Q1 to DKK 128.3 million driven by higher sales especially in the Enterprise segment within Business Communications. Revenue growth in Business Communications was 15.8% with the framework agreements announced during 2017/18 (in “ramp phase”) contributing to the growth. Design Services revenue decreased marginally by 0.9% compared to last year as the increased recurring revenues from product sales and royalties within the ProAudio and Healthcare segments could not fully compensate lower engineering (NRE) revenues.

• The revenue growth in Q1 was positively affected by the USD exchange rate with

FX corrected revenue growth of 7.3%.

• Th

The e Gr Gross Ma Margin in Q1 was 1.6%-points above last year due to changes in the revenue mix.

• St

Staff ff costs ts increased as planned with the strategy execution – for ramping-up capacity in order to execute the two major framework agreements announced during 2017/18, for handling development on the two additional framework agreements announced end of Q4 2018/19 and for continuing to build the

• rganization and infrastructure necessary for further growth. The average

number of FTEs increased to 291 in Q1 2019/20 compared to 267 in Q1 2018/19. Other capaci city ty (ex external) costs ts decreased compared to last year due to one-off costs in Q1 last year.

• Operati

ting per erfo formance in Q1 improved with EBIT BITDA increasing by 101.8% and EBI BIT increasing by 109.2%.

GROUP BALANCE SHEET

• Inta

ntangible assets ts increased due to the continued investments in own financed development projects.

• Tangible assets have increased with the implementation of IFRS 16

(capitalization of leasing) – adding approx. DKK 40 million to assets.

• Oth

ther non non-cu curr rrent assets decreased compared to last year as the deferred tax asset in the parent has now been fully utilized.

• Re

Rece ceivables increased with higher activity and with working capital fluctuations on development (engineering) contracts for customers.

• Cash and

nd cash equ quivalents ts increased compared to last year due to cash flow from operations generated during the period and decreased with distributions to shareholders.

• Equ

Equity positively impacted by the profits of the past year and negatively by dividend payment plus the share repurchase programs in 2019.

• Non
• n-cu

current liabilities increased due to implementation of IFRS 16 (adding calculated leasing debt approx. DKK 36 million to non-current liabilities).

• A solid equ

quity ra rati tio despite continued share buy-backs and effects of implementation of IFRS 16 with increasing debt.

16

DKK million 31 Dec 19/20 31 Dec 18/19

Assets Total intangible assets 55.3 45.9 Total tangible assets 55.6 14.9 Other non-current assets 9.6 13.2 Inventories 21.3 18.1 Receivables 133.8 127.9 Cash and cash equivalents 208.3 190.4 Total assets 483.9 410.4 Liabilities Equity 344.8 321.0 Non-current liabilities 44.2 0.9 Current liabilities 94.9 88.4 Total equity and liabilities 483.9 410.4

Equity ratio

71.2% 78.2%

GROUP CASH FLOW

17

DKK million Q1 19/20 Q1 18/19

Cash flow from operations (CFFO) 6.5 12.9 Cash flow from investments

• 9.7
• 5.4

Cash flow from financing activities

• 14.0

Change in cash

• 17.2

7.5

• Continued cas

ash h generation fr from op

• perations, however,

impacted by working capital fluctuations (development in receivables and payables) and tax payments during Q1 compared to LY.

• Cas

ash flo flows s fr from in investments primarily investments into capitalized development activities (intangibles) plus into some tangible assets.

• Cas

ash flo flow fr from fina financing acti activities s primarily impacted by continued share buy-back program in Q1 2019/20 (no such program in Q1 2018/19). Additional impact from IFRS 16 re- classifying part of lease payments as repayment of calculated lease liabilities.

INCREASE AND MODIFICATION OF ONGOING SHARE BUY -BACK PROGRAMME

18

Ongoing programme increased and modified to:

• Amount of up to DKK 60 million and no more than

600,000 shares (previously DKK 20 million and 200,000 shares)

• Period: 1 January 2020 to 30 September 2020

(previously 1 January 2020 to 30 June 2020)

• In addition to limitations under “Safe Harbour

regulations”, an additional limitation of maximum

• f 15% of total volume traded on Nasdaq

Copenhagen may be acquired under the programme over the course of the programme

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OUTLOOK AND LONG-TERM AMBITIONS

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DK DKK mill illion Resu esult 20 2016 16/17 Resu esult 20 2017 17/18 Resu esult 20 2018 18/19 Outl utlook 20 2019 19/20

Revenue 433.5 475.3 560.3 620 - 650 EBITDA 77.2 83.1 100.2 105 - 120 EBIT 72.3 74.9 86.7 75 - 90

OUTLOOK 2019/20

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As described in our annual report in the section concerning risk management, RTX is relatively highly exposed to foreign currencies, as a considerable part of the revenue is settled in US dollars. Given the nature of the expected growth from framework agreements under ramp-up as well as from new framework agreements being started up, it is expected that the revenue distribution over 2019/20 will be relatively backloaded towards the end of the year – as also described in our annual report.

Further execution of growth strategy expected to lead to profitable growth

LONG-TERM FINANCIAL AMBITIONS

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Based on our strategy of deploying our wireless wisdom in selected B2B target markets for growth via recurring revnues, and based on execution of existing and new framework agreements, it is the ambition of RTX to grow revenues

• rganically by an average of 13-16% p.a. in the period from

end 2018/19 up to and including the fiscal year 2021/22.

ORGANIC REVENUE GROWTH EBITDA MARGIN ASSUMPTIONS ORGANIC REVENUE GROWTH EARNINGS (EBITDA MARGIN)

AVERAGE OF 13-16% P.A. UNTIL 2021/22 18-20% BY 2021/22

With our long-term revenue growth ambitions, and with the leverage effect on the scalability of our resources from increased recurring revenues, it is the ambition of RTX to achieve an EBITDA margin of 18-20% by the completion of the fiscal year 2021/22. This ambition reflects inclusion of the effect of the implementation of IFRS 16 regarding leasing. The long-term revenue and earnings ambitions are based on constant currencies with the ambitions especially being sensitive to the USD/DKK exchange

• rate. They are also based on the current

macroeconomic and political environment, where major developments may also impact the

• ambitions. The ambitions are also based on stable

raw material prices and supply chain performance and availability. Also, note that the long-term financial ambitions are until/by the fiscal year 2021/22 and in the interim years growth rates and margins realized may vary from year to year.

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Q&A SESSION

January 2020

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APPENDIX: RTX GROWTH STRATEGY

January 2020

STRENGTHEN POSITION IN HEALTHCARE

• Increase share-of-wallet

UTILIZE UNIQUE POSITION IN PROAUDIO

• Leverage unique technology into recurring revenue via ODM/OEM

model

• Lead the transition to digital wireless in pro audio markets

EXPAND LEADERSHIP AND GROW INTO ADJACENCIES IN EN ENTERPRISE

• Continue to gain market share and drive market consolidation
• Drive recurring revenue from long-term customer agreements via

pure play ODM/OEM model

• Utilize system integration as competitive advantage
• Leverage Enterprise leadership position and sector expertise to

establish a presence in adjacencies, such as B2B Headsets

RTX GROWTH STRATEGY IN TARGET MARKETS

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RTX TODAY: REVENUE BY TARGET MARKETS 2018/19 RTX GROWTH STRATEGY UNTIL 2021/22

560 DKKm

TOTAL REVENUE

DESIGN SERVICES BUSINESS COMMUNICATION HEALTHCARE PROAUDIO ENTERPRISE Wireless/IP telephony and headsets

69% 26% 5%

1 3-year revenue CAGR (2016-19).

CAGR1 ~11.0% RTX CAGR1 ~12.5% CAGR1 ~11.0% CAGR1 ~13.0%

• DECT technology remains attractive in

the enterprise market space

• Superior performance1 compared to

Wi-Fi/VoWLAN

• Attractive price compared to cellular
• Superior security
• Some upside in DECT; primarily via new

players in USA2

• Ongoing market consolidation; driven in

part by increased outsourcing

RTX GAINING SHARE AS MARKET LEADER IN STABLE AND CONSOLIDATING MARKET

25

ENTERPRISE: MARKET TRENDS

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KEY MARKET TRENDS MARKET SIZE AND GROWTH MARKET CONSOLIDATION

325 25 328 28 357 57 374 74 389 89 397 97 402 02 162 62 147 47 151 51 148 48 143 43 138 38 132 32

201 016 201 017 201 018 201 019F 9F 202 020F 0F 202 021F 1F 202 022F 2F

USD Million Source: Frost & Sullivan and MZA

1 E.g. talk time and handover. 2 USA has traditionally been a Wi-Fi/VoWLAN focused enterprise market 3 Includes both multi-cellular and single-cell handsets 4 DECT revenue CAGR 5 Includes RTX.

3% market growth combined with 1 %-point increase in market share (from 20%), in itself, indicates growth opportunity of ~8% p.a.

TOTAL PROFESSIONAL HANDSET MARKET3

% of Total Multi-Cellular Handset Market

487 475 508 522 532 535 534

MANUFACTURER MARKET SHARES BY VOLUME

2013 2014 2015 2016 2017 2018 80 70 60 50 40 30 20 10 RTX Top-35 Top-55 DECT VoWLAN

CAGR4 ~3.0%

EXPAND LEADERSHIP AND GROW INTO ADJACENCIES

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ENTERPRISE: RTX GROWTH STRATEGY

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Drive recurring revenue from long-term customer agreements via pure play ODM/OEM model Utilize system integration as competitive advantage Leverage enterprise leadership position and sector expertise to establish a presence in adjacencies1

1 E.g. B2B headsets, conference phones and/or beacons.

CONTI TINUE TO O GAIN GAIN MAR MARKET T SH SHAR ARE AN AND DR DRIVE MAR MARKET CONSOLIDATION

Grow with DECT technology while ensuring long-term technology agility

0,6 0,6 0,7 0,7 0,8 0,8 0,6 0,7 0,9 1,0 1,1 1,3

19 21 24 27 31 34

5 10 15 20 25 30 35 0,0 0,5 1,0 1,5 2,0 2,5 3,0

LEVERAGE ENTERPRISE POSITION IN ADJACENCIES EXAMPLE: B2B HEADSETS

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ENTERPRISE ADJACENCY, B2B HEADSETS: MARKET TRENDS & RTX GROWTH STRATEGY

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HIGH-GROWTH MARKET DRIVEN PRIMARILY BY THE DEMAND FOR WIRELESS CONNECTIVITY

GLOBAL PROFESSIONAL HEADSET MARKET

1.2 1.4 1.5 1.7 1.9 2.1

Wireless Revenue in USDbn Units in million

LEVERAGE ENTERPRISE LEADERSHIP POSITION AND SECTOR EXPERTISE TO ESTABLISH PRESENCE IN B2B HEADSETS Utilize system integration as competitive advantage Provide ODM/OEM headset offering as additional revenue opportunity for Enterprise partners

Source: Frost & Sullivan

1 2018-2022 wireless revenue CAGR.

Corded Revenue in USDbn 2017 2019F 2018 2020F 2022F 2021F

CAGR1 ~14.0%

Revenue & Units

PRO AUDIO MARKET TRANSITION CREATES RTX GROWTH OPPORTUNITIES

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PROAUDIO: MARKET TRENDS

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RTX PROAUDIO CONSISTS OF THREE SEGMENTS, WITH MICS & STAGE AS OUR PRIMARY TARGET AREA FOR GROWTH MICS & STAGE IS ATTRACTIVE DUE TO ONGOING TRANSISTION FROM WIRED ANALOG TO DIGITAL WIRELESS 2 MILLION PRO WIRELESS MICS, PLUS NON- MICS UPSIDE, CONSTITUTE SIGNIFICANT RTX GROWTH OPPORTUNITY

Source: Arizton.

1 At the benefit of e.g. mobile phones, internet broadband etc. 2 2017 to 2023 CAGR. 3 Pro audio devices such as power amplifiers, speaker enclosures, and mixers. DJ products such as digital controllers, mixers, and headphones. Instruments such as e.g. guitars.

PRO WIRELESS MICROPHONE MARKET

1.8 1.8 1.9 2.0 2.1 2.2 2.3

Million Units Per Year

Significant additional market potential, beyond micro- phones, in instruments, DJ products, and other pro audio devices, where wireless transmission is relevant3.

2017 2018 2021F 2020F 2019F 2022F 2023F

• Spectrum repack
• Microphone frequencies are being reallocated to

video- and broadband services1

• The regulatory changes are occuring in both US and

Europe

• Increased need
• The music industry is becoming increasingly more

dependent on live performances; due to disruptions in music publishing industry

• Live performances are growing significantly in

complexity and needed channel count/number of microphones

• New requirements
• New requirements to robustness, and security

requires a digital transmission technology

PROAUDIO

MICS & STAGE INTERCOM GAMING

Deploy and refine our existing technology base… …into a flexible technology platform with dedicated RTX modules and custom ODM/OEM

UTILIZE UNIQUE POSITION IN PROAUDIO

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PROAUDIO: RTX GROWTH STRATEGY

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We move from engineering hours… …to recurring revenue Short time-to-market Attractive cost of entry

LEAD THE TRANSITION TO DIGITAL WIRELESS IN PRO AUDIO MARKETS LEVERAGE UNIQUE TECHNOLOGY INTO RECURRING REVENUE VIA ODM/OEM MODEL

Attractive value propositions for RTX customers Scalability for RTX

STRENGTHEN POSITION IN HEALTHCARE

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HEALTHCARE: MARKET TRENDS & RTX GROWTH STRATEGY

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Pressure to reduce costs and prove value remains intense3 and drives need for new technology4. Medtech1 sales are estimated at 425 USD billion globally with expected CAGR of 5% towards 20222 Expand share of value chain (e.g. production of subassemblies) Extend portfolio

• f ODM offerings

EXPAND EXISTING CONTINUOUS PATIENT MONITORING BUSINESS BY INCREASING SHARE-OF-WALLET WITH OURONG-TERM BLUE CHIP HEALTHCARE CUSTOMER HEALTHCARE MARKET DEPENDS ON NEW TECHNOLOGIES, DIGITAL AND WIRELESS, TO INCREASE EFFICIENCY AND KEEP UP WITH DEMAND

Source: Economic Intelligence Unit, OECD, Deloitte

1 E.g. in vitro diagnostics, cardiology, diagnostic imaging etc. 2 Healthcare growth in general, is driven by ageing and growing populations, emerging market expansion, increase in chronic diseases (e.g. cancer, heart disease, and diabetes), and advances in treatments 3 Resulting in focus on efficient use of resources, shift in focus from procedures towards outcomes (also referred to as value-based healthcare), and increasing focus on virtual healthcare – all to help drive cost efficiency 4 E.g. networked medical devices (mobile, wearing external, implantable), remote care system, identification systems etc.

Further information, please contact President and CEO Peter Røpke or CFO Morten Axel Petersen at +45 9632 2300

THANK YOU FOR YOUR ATTENTION

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