[PPT] - RTX PRESENTATION Q3 2019/20 Presentation by CEO Peter Rpke CFO PowerPoint Presentation

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RTX PRESENTATION Q3 2019/20

COPENHAGEN I 28 AUGUST 2020

Presentation by CEO Peter Røpke CFO Morten Axel Petersen

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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.

August 2020

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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.

August 2020

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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%

August 2020

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AGENDA

1. Business and Full-Year Update
2. Financial Update Q3 2019/20
3. Recap: Business Model and Growth Strategy
4. Q&A Session

5

Peter Røp øpke President & CEO Mor

rten Axel

l Petersen CFO

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6

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BUSINESS AND FULL- YEAR UPDATE

August 2020

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Satisfactory Q3 with revenue and earnings growth, despite COVID-19 challenges.
Revenue growth in the Enterprise segment (Business Communications) primarily driven by

Headsets.

Within Design Services revenue growth is driven primarily by Healthcare and by recurring

revenues from product sales and royalties, while revenues from engineering services (NRE) decrease in line with strategy.

Focus on cost management and resource utilization across the RTX organization.
Full year revenue outlook challenged by the COVID-19 pandemic. Customers’ conversation rate

from forecast to orders is lower than expected.

Full year earnings outlook maintained and narrowed with prudent cost management
Customers still committed to new product development activities. Therefore, RTX’s strategic

direction is still considered to be right.

BUSINESS UPDATE Q3 2019/20

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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 Orig iginal outl

utlook

20 2019 19/20 Upd pdated ou

utlook (24

(24 Aug Aug) 20 2019 19/20

Revenue 433.5 475.3 560.3 620 - 650 550 - 570 EBITDA 77.2 83.1 100.2 105 - 120 105 - 115 EBIT 72.3 74.9 86.7 75 - 90 80 - 90

UPDATED OUTLOOK 2019/20

R E V E N U E O U T L O O K A D J U S T E D ; E A R N I N G S O U T L O O K M A I N TA I N E D A N D N A R R O W E D

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The COVID-19 pandemic increases uncertainty related to the global flow of goods (sporadic lockdowns etc.). The outlook for 2019/20 assumes that no unforeseen events occur causing supply or logistics disruptions. As described in the 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.

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CURRENTLY EIGHT 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

7. ProAudio
8. Enterprise

PROLONGATION/RENEWAL MAIN PHASE RAMP PHASE

5. Enterprise (headset)
6. Enterprise
1. Enterprise
2. Enterprise
3. Enterprise
4. Healthcare

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

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FINANCIAL UPDATE Q3 2019/20

August 2020

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11

GROUP FINANCIAL HIGHLIGHTS Q3 2019/20

REVENUE

11 DKKm

EB EBITDA

DKKm

Q3 3 15 15/1 /16 Q3 3 16 16/1 /17 Q3 3 17 17/1 /18 Q3 3 18 18/1 /19 Q3 3 19 19/2 /20 0,0 5,0 10,0 15,0 20,0 25,0 30,0 35,0

EB EBIT

DKKm

DKK 158m

REVENUE

DKK 39m

EBITDA EBIT

66%

EQUITY RATIO

24.6%

EBITDA-MARGIN

DKK 33m

Q3 3 15 15/1 /16 Q3 3 16 16/1 /17 Q3 3 17 17/1 /18 Q3 3 18 18/1 /19 Q3 3 19 19/2 /20 0,0 20,0 40,0 60,0 80,0 100,0 120,0 140,0 160,0 Q3 3 15 15/1 /16 Q3 3 16 16/1 /17 Q3 3 17 17/1 /18 Q3 3 18 18/1 /19 Q3 3 19 19/2 /20 0,0 5,0 10,0 15,0 20,0 25,0 30,0 35,0 40,0

DKK 48m

CFFO

DKK 400m

REVENUE

DKK 72m

EBITDA EBIT

DKK 62m

DIVIDEND & BUY-BACKS

17.9%

EBITDA-MARGIN

DKK 55m DKK 78m

CFFO

Q3 Q3 9M 9M

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+6.5% +31% +24%

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GROUP P&L Q3 & NINE MONTHS (9M) 2019/20

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Re

Revenue in Q3 increased by 6.5% compared to last year. Both Business Communications (+7.8%) and Design Services (+3.5%) increased revenue. The growth was primarily driven by Enterprise Headsets and from the Healthcare segment (patient monitoring). Enterprise Handset and Base Station products were impacted from deliveries postponed from Q2 into Q3 and by quarter-on-quarter fluctuations during the ramp phase of a large framework agreement announced during Q3 2017/18. Recurring revenue from product sales and royalties increased while revenues from engineering services (hourly-based engineering) decreased in line with the growth strategy.

FX corrected revenue growth of 4.7% due to positive impact, of limited magnitude,

from the USD exchange rate in Q3.

The

he Gro ross Ma Margin in Q3 decreased by 2.2 %-points over last year due to changes in the revenue mix with a higher share of product sales relative to revenues from engineering services.

Prudent cost management in response to COVID-19 have kept capaci

city ty cos

sts below
plan. The average number of FTEs has increased from 281 in Q3 last year to 291 this

year for ramping-up capacity in order to execute the new framework agreements announced over the last couple of years. However, during Q3 the number of FTEs is largely unchanged, i.e. fewer new employees than planned and instead internal reorganization of engineering resources. Additionally, lower employee bonus costs. Other external costs decreased compared to last year due to implementation of IFRS 16 (capitalization of leasing).

With increased revenue and tight cost management, EB

EBITDA increased by 31.1% in

Q3. For 9M, EBITDA is 13.1% above last year. Similarly, EB

EBIT increased by 24.2% in Q3 and by 1.8% for 9M. DKK million Q3 19/20 Q3 18/19 9M 19/20 9M 18/19

Revenue 158.5 148.9 399.5 403.2 Cost of sale

72.6
64.9
171.8
174.2

Gross profit 85.9 83.9 227.7 229.0

Gross margin % 54.2% 56.4% 57.0% 56.8%

Other external cost

13.5
14.4
40.6
46.2

Staff cost

41.1
45.0
136.0
133.7

Value of own work transferred to assets 7.7 5.1 20.6 14.3 EBITDA 38.9 29.7 71.7 63.4 Depreciation and amortization

6.3
3.4
17.0
9.7

Operating Profit (EBIT) 32.6 26.2 54.6 53.6

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GROUP BALANCE SHEET

Intangible

le assets ts increased due to the continued investments in

wn financed development projects.
Tangib

ible le assets have increased with the implementation of IFRS 16 (capitalization of leasing) – adding approx. DKK 37 million to assets.

Receivable

les decreased due to the timing of sales within the quarter (Q3) compared to last year.

Cas

ash and nd cas ash equi quivale lents increased compared to last year due to cash flow from operations generated during the period and decreased with distributions to shareholders (dividends and share buy-backs).

Equ

quity ity positively impacted by the profits of the past year and negatively by dividend payment and the various share buy-back programs in 2019 and 2020.

No

Non-current liab iabili ilitie ies increased due to implementation of IFRS 16 (adding calculated leasing debt of approx. DKK 34 million).

Current

t liab iabili ilitie ies increased due to implementation of IFRS 16 (adding calculated leasing debt of approx. DKK 6 million).

A solid equ

quity ity ratio tio despite dividend payments and share buy-backs and effects of implementation of IFRS 16 with increasing debt.

13

DKK million 30 Jun 19/20 30 Jun 18/19

Assets Total intangible assets 62.8 52.3 Total tangible assets 53.8 14.6 Other non-current assets 9.5 7.9 Inventories 19.4 21.1 Receivables 143.7 156.0 Cash and cash equivalents 210.5 190.0 Total assets 499.7 441.8 Liabilities Equity 328.3 324.1 Non-current liabilities 47.4 4.3 Current liabilities 124.0 113.4 Total equity and liabilities 499.7 441.8

Equity ratio

65.7% 73.4%

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GROUP CASH FLOW NINE MONTHS (9M) 2019/20

14

DKK million 9M 19/20 9M 18/19

Cash flow from operations (CFFO) 78.4 62.4 Cash flow from investments(1)

27.8
50.6

Cash flow from financing activities

65.8
37.2

Change in cash

15.3
25.3
Continued cas

ash h gene neratio ion from

m op
peratio

ions, aided by earnings and working capital fluctuations. Increased tax payments during 9M compared to last year.

Ca

Cash sh flo lows s from in investments primarily investments into capitalized development activities (intangibles) and secondarily into some tangible assets.

Cash

Cash flo low from finan inancin ing act activ ivit itie ies s primarily impacted by higher dividend payment and higher share buy-back program in 9M 2019/20 compared to last year with total payment of DKK 61.5 million (last year: DKK 37.2 million). Share buy-back program suspended on 13 March 2020 as a precautionary measure. Additional impact from IFRS 16 re-classifying part of lease payments as repayment of calculated lease liabilities.

(1) Including acquisition of current securities in the trading portfolio – with impact 9M 2019/20 of DKK -1.8 million (9M 2018/19: DKK -32.6 million). I IR Presentation August 2020

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RECAP: BUSINESS MODEL AND GROWTH STRATEGY

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RTX BUSINESS MODEL FOR CONTINUED PROFITABLE GROWTH

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

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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

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WHO WE WORK FOR

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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%

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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

August 2020

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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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