FRR Corporation Limited. Investor Presentation

Transcription

1 FRR Corporation Limited (to be renamed Rhype Limited) Investor Presentation 9 December 2013

2 Disclaimer This presentation has been prepared by FRR Corporation Limited ACN (FRR). Each Recipient of this presentation is deemed to have agreed to accept the qualifications, limitations and disclaimers set out below. None of FRR and or its subsidiaries or their respective directors, officers, employees, advisers or representatives (Beneficiaries) make any representation or warranty, express or implied, as to the accuracy, reliability or completeness of the information contained in this presentation, including any forecast or prospective information. The forward looking statements included in this presentation involve subjective judgment and analysis and are subject to significant uncertainties, risks and contingencies, many of which are outside the control of, and are unknown to, the Beneficiaries. Actual future events may vary materially from the forward looking statements and the assumptions on which those statements are based. Given these uncertainties, you are cautioned to not place undue reliance on such forward looking statements. This presentation is a general overview only and does not purport to contain all the information that may be required to evaluate an investment in FRR. The information in this presentation is provided personally to the Recipient as a matter of interest only. It does not amount to an express or implied recommendation with respect to any investment in FRR nor does it constitute financial product advice. The Recipient, intending investors and respective advisers, should: conduct their own independent review, investigations and analysis of FRR and of the information contained or referred to in this presentation; and/or seek professional advice as to whether an investment in FRR is appropriate for them, having regard to their personal objectives, risk profile, financial situation and needs. Nothing in this presentation is or is to be taken to be an offer, invitation or other proposal to subscribe for shares in FRR. Except insofar as liability under any law cannot be excluded, none of the Beneficiaries shall have any responsibility for the information contained in this presentation or in any other way for errors or omissions (including responsibility to any persons by reason of negligence). 2

3 The NewLease Business NewLease is the leading channel for cloud and service provider software licenses in Australia, New Zealand, and is well on the way to being the market leader in Asia Pacific We are positioned at the heart of a global trend for businesses of all sizes to consume software and infrastructure on a subscription basis via cloud services We represent some of the world s leading software vendors and continue to expand our vendor representation What sets us apart is our culture, processes and business model which has been focused on enabling cloud and managed services since 2003 Doug Tutus, CEO 3

4 Summary NewLease Transaction Terms FRR will acquire 100% of NewLease for scrip at effective valuation of $13.5m NewLease shareholders receive 1,350.0m shares m Management options in consideration FRR plus NewLease will have net cash of approximately $2.5million post transaction FRR to be renamed Rhype Limited FRR Capital Structure post transaction (pre 1:20 share consolidation) Share Capital Ordinary Options 2 Management Shares 1 Options Existing Shares & Options 488,689,375 80,000,000 85,000,000 3 Issue of Consideration Shares & Options 1,350,000,000-85,000,000 4 Total Securities on Issue 1,838,689,375 80,000, ,000,000 Note: 1. Excludes the effect of a capital raising at a price to be determined, that may be required to achieve spread and allow for employees of NewLease to participate and acquire ordinary shares in the Company. 2. Unquoted options having an exercise price of 1 cent per option (pre-consolidation) and expiring 31 December Excludes 125,000 pre-consolidation employee options that are exercisable at $1.20 by 26 November These Management Options are unquoted, have an exercise price of 1 cent per option (pre-consolidation) and are split into 2 equal tranches 4

5 Investment Highlights Newlease's sole focus from inception has been offering cloud software licenses on behalf of vendors and the provision of related services. This is a disruptive new software channel that fully captures and delivers the value of the Cloud services opportunity. 5 5

6 Investment Highlights 1. Attractive Business with Significant Demand NewLease is a market leading channel for subscription software licences¹ to IT service providers delivering cloud services to businesses² Cloud and managed service solutions are in strong demand and driven from a number of sources: end users seeking variable IT software solutions delivered as a service; data centres seeking to fill infrastructure capacity; IT service providers seeking to assist their clients (end users) with software as a service cloud solutions; and Software vendors seeking to replace traditional one off sales with subscription based cloud sales 1 Subscription software licences are for monthly software usage typically based on end user number of seats or processors 2 End users are small and large enterprise customers 6

7 Investment Highlights 2. High Growth and Scale NewLease has recorded 5 year compound revenue growth of 47% p.a. from monthly subscription software license revenue streams in the Australian, New Zealand and more recently Asian Pacific markets Revenue is recurring and sticky: monthly annuity subscriptions based on software usage Scalable business processes and systems built over last 3 years will provide operating leverage as revenues grow Little or no CAPEX requirement 7

8 Investment Highlights 3. Experienced Team Core executive team have been working in this industry sector for over 10 years The Board and advisory team at FRR adds a wealth of experience to assist NewLease fulfil its future strategy and objectives Together the combination of NewLease executives and FRR board and advisory committee support will assist in achieving overall growth objectives both organically and via M&A 8

9 Investment Highlights 4. Asian Expansion The new ownership structure will enable NewLease to take advantage of the opportunities that are presenting themselves to grow further in both product and geographical reach; NewLease has a number of offices open already after securing software vendor support and is in the process of investigating new regions Asia has a high piracy rate and is therefore very attractive for software providers to transform traditional one off sales to subscription revenue streams The success with the existing software partners in Australia for this service has opened these new regions for NewLease Limited competition and early stage of development for Service Provider Licensing Agreements 9

10 Market The public cloud services market is forecast to grow 18.5% in 2013 to total $131 billion worldwide Australia is ahead of the pack, growing by 23.1% to US$3.2 billion this year Gartner, February 2013 Australian cloud computing market worth c.$880m in 2012, growing at 40% p.a. to 2016 Frost & Sullivan, December 2012 In many parts of Asia Pacific there is less legacy IT infrastructure so businesses can move directly to the cloud KPMG, Breaking through the cloud adoption barriers, Cloud Providers Survey,

11 Market The business applications (SaaS) market is expected to be the fastest growing category of cloud services in Australia over the next several years, reaching A$874 million and growing at least 27% year-over-year Parallels SMB Cloud Insights for Australia, August 2013 Asia Pacific SMB Cloud Market is expected to grow from $7.6 billion in 2012 to $19.8 billion in 2015 with CAGR of 38%. The business applications (SaaS) segment is expected to grow at 40% p.a. to $6.6 billion, and infrastructure services (IaaS) at 36% p.a. to $7 billion Parallels Global SMB Cloud Insights Report,

12 Disruptive Service Cloud services trend is disrupting traditional software distribution Enterprise software is increasingly being sold as-a-service via Managed Services or the Cloud (Infrastructure-aaS, Platform-aaS, Software-aaS) DB Research: Expanding the Pie, Cloud Research, Aug 2013 During the last decade, the SaaS category not only grew 11x in market cap, its share of total software market capitalization has grown from 2% to 14%. We expect the SaaS category market cap to reach ~$600bn by 2020 with a share of ~38% of total software market capitalization DB Research: Expanding the Pie, Cloud Research, Aug 2013 Half of the (service) providers are changing their licensing model to reflect the move away from traditional IT solutions KPMG: Breaking through the cloud adoption barriers, Cloud Providers Survey,

13 Disruptive Service Cloud services trend is disrupting traditional software distribution Microsoft s Cloud service provider channel is its fastest growing distribution channel Microsoft executive The shift to the cloud puts more control in the hands of the solutions provider (as opposed to the product vendor) Redwood Capital: Private Equity in the Cloud and IT Services Sector Sep 2013 SMBs want a single source, diversity of business functions, and a spectrum of software as a service (SaaS), infrastructure as a service and platform as a service services. The signs are right for hosters to develop an aggregator/broker model Microsoft Drivers and Inhibitors to Cloud Adoption for SMBs, 2012 Report 13

14 Growth Strategy Market The market is growing at 30-40% p.a. Software vendors preparing for high growth in subscription based Cloud (Software-as-a- Service (SaaS), Infrastructure-as-a-Service, Platform-as-a-Service, Business Continuity) New product Sign up new software vendors added Red Hat, DataCore, McAfee in last 12 months cross sell of different software offerings to existing customers Geographic expansion Expand into Asia Pacific with vendor support opened Singapore (24mths), Philippines, and Thailand (last 12mths) Malaysia in progress after winning Microsoft region distribution rights for SPLA Indonesia, Vietnam and Hong Kong all planned Acquisitions Acquire adjacent cloud service businesses in current or new regions Acquire new product, services and new IP related to client base 14

15 Business Structure and Team Background and profile Established in 2003 Staff of 42 Selling and business development culture Melbourne based with offices in Sydney, Auckland, Singapore, Bangkok, Manila and KL Over 800 service provider clients Revenue primarily monthly subscription based Executive Team Doug Tutus, CEO Dawn Edmonds, COO Mark Carroll, CFO Warren Nolan, Head of Sales Strategy Patara Yongvanich, MD SE Asia Proposed Board of Rhype Ltd Mike Hill, Chairman Doug Tutus, CEO Dawn Edmonds, COO Mike Everett, NED Laurence Sellers, NED Philip Kapp, NED 15

16 NewLease Financial Summary NewLease financial statements ($000s) Year Ended Year Ended Year Ended 30-Jun-11 (unaudited) 30-Jun-12 (audited) 30-Jun-13 (audited) Revenue 25,513 37,822 51,514 EBITDA EBITDA after adding back growth investment expenditure expensed* n/a n/a 1,644 47% CAGR in revenues over the past 5 years Future reported earnings will vary depending upon the level of investment made to fund growth opportunities. In fiscal 2013, this growth investment represented c.$760,000 and in 2014 it is currently estimated to be in excess of $1m. In line with the companies conservative nature and reflective of the cash generated within the business, these costs are being expensed not capitalised. 16

17 Consistent Growth in Customers and Revenues Revenue growth Core revenue growth in Australia and New Zealand remains positive supplemented by new markets Singapore growth acceleration supported through some existing clients from Australia/New Zealand procuring software licenses through Singapore Customer Growth Consistent growth in customers both by number and by size 17

18 Expansion Leads to Incremental EBIT Illustrative Growth Phasing Phase 1 Enter new market with limited fixed costs (2-3 heads). Typically, 1 business development, 1 technical sales and 1 administration head. Cost of entry into new market ~$300k to $500k pa. Phase 2 - Cash flow positive at approx $3m of revenue to cover phase 1 fixed costs and build EBITDA. Phase 3 Beyond the break even point, gross margin will fall through to the bottom line as operations and support are centralized New markets revenue grows in line with cloud IT as a service market, of circa 30-40% pa. 18

19 Major Shareholders at Completion and Indicative Timetable Major Shareholders at Completion Doug Tutus 41.67% Dawn Edmonds 6.25% Campsmount Pty Ltd 5.32% Indicative Timetable Date Dispatch of Notice & Explanatory Statement 20 December 2013 Lodge Prospectus with ASIC and ASX 20 December 2013 Shareholder Meeting 20 January 2014 Notification to the ASX of the results of the Meeting 20 January 2014 Suspension of trading in the Company s Securities 20 January 2014 Offer under Prospectus Opens 10 January 2014 Offer under Prospectus Closes 20 January 2014 Complete Acquisition and Issue of Shares under the Prospectus 23 January 2014 Consolidation Record Date 25 January 2014 Reinstatement to Official Quotation on the ASX 31 January

20 Appendix

21 Differentiation Traditional Software Sales everything is geared to close the sell Cloud Managed Services Sales everything is geared to drive ongoing usage Stock Sales focused Promised value Margin portfolio Sales accounting Delivery logistics Price Marketing launch Sell Service focused Realised value Value portfolio Usage accounting Usage reporting Ease of acquisition Total product offer Use Process, organisation and cultural shift The excellent processes that lead to success in one model becomes the blocker to deliver the other