2016 Q1 Earnings Conference Call TeraGo Networks Inc.

Transcription

1 2016 Q1 Earnings Conference Call

2 Forward Looking Statements This presentation includes certain forward-looking statements that are made as of the date hereof and are based upon current expectations, which involve risks and uncertainties associated with our business and the economic environment in which the business operates. All such statements are made pursuant to the safe harbour provisions of, and are intended to be forward-looking statements under applicable Canadian securities laws. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. For example, the words anticipate, believe, plan, estimate, expect, intend, should, may, could, objective and similar expressions are intended to identify forward-looking statements. This presentation includes, but is not limited to, forward looking statements relating to TeraGo s growth strategy and financial flexibility to achieve its strategy, growth in the sector, continued sales momentum, new product launches in 2016, the enabling of faster time-to-market delivery of VMware cloud based products, strong pipeline of opportunities, achievement of economies of scale, investments in data centers and other IT services, the realization of annualized synergies and achieving internal synergy targets, the integration of RackForce Networks Inc. and BoxFabric into the Company, and general future financial results. By their nature, forward-looking statements require us to make assumptions and are subject to inherent risks and uncertainties. We caution readers of this document not to place undue reliance on our forward-looking statements as a number of factors could cause actual future results, conditions, actions or events to differ materially from the targets, expectations, estimates or intentions expressed with the forwardlooking statements. When relying on forward-looking statements, whether written or oral, to make decisions with respect to the Company, investors and others should carefully consider the risks, uncertainties and assumptions, including the risk that the trend of sales and growth not continuing, delays in new product launches impacting sales, delays in delivery of VMware cloud based products, retention efforts decreasing profit margins, pipeline opportunities for expansion and acquisition not being available or at unfavourable terms, the Company not being able to realize the anticipated benefits and synergies from combining and integrating RackForce Networks Inc. and BoxFabric, revenue growth strategies may not materialize, trends in the global cloud and data center sectors may not be accurately projected, transition to a multi-product IT services company will not generate the results intended by management, those risks set forth in the Risk Factors section in our annual MD&A for the year ended December 31, 2015 available on and other uncertainties and potential events. In particular, if any of the risks materialize, the expectations, and the predictions based on them, of the Company may need to be reevaluated. Consequently, all of the forward-looking statements in this presentation are expressly qualified by these cautionary statements and other cautionary statements or factors contained herein, and there can be no assurance that the actual results or developments anticipated by the Company will be realized or, even if substantially realized, that they will have the expected consequences for the Company. Except as may be required by applicable Canadian securities laws, the Company does not intend, and disclaims any obligation to update or revise any forward-looking statements, whether oral or written as a result of new information, future events or otherwise. 2

3 Stewart Lyons President & Chief Executive Officer

4 TeraGo Overview TeraGo is Canada s premier enterprise class network, data, voice and cloud services provider Comprehensive portfolio serves the needs of customers of all sizes, from SMBs to large global enterprises Large existing base of over 4,000 customers Multiple products creates cross selling and solutions based opportunities Best in class infrastructure with national network Facilities based background enables control of value chain Data Centers Colocation Managed Services Hosting Cloud IaaS / PaaS Cloud Computing Cloud Storage Disaster Recovery Managed Backups Managed Services Network & Voice Speeds/Feeds Redundancy Managed Services Unified Communications TeraGo s is Canada s Premier Enterprise Class Network, Data, Voice and Cloud Services Provider 4

5 Q Highlights Total revenue increased 22.0% to $14.9 million for the quarter compared to Q Adjusted EBITDA increased 26.5% to $4.7 million for the quarter compared to Q Continued growth in the Cloud and Data Centre segment Segment organic revenue growth of ~20% annualized compared to Q4 15, while accounting for 30% of total revenues Several large deals were provisioned during the quarter Announced an expanded collaboration with VMware to deliver enhanced VMware-based cloud services across Canada TeraGo will receive earlier access to new technology from VMware, enabling innovative services and a faster time-to-market TeraGo named in CIO Review s 20 Most Promising IT Infrastructure Solution Providers list for expertise in managing data and IT infrastructure 5

6 Joe Prodan Chief Financial Officer

7 Revenue & Adjusted EBITDA Revenue ($ millions) $12.2 $0.9 $14.9 $4.4 Total revenue increased 22.0% in Q1 16 compared to Q1 15 Cloud and Data Centre revenue increase of $3.5 million driven mainly by acquisition of RackForce $11.3 $10.5 Q1'15 Network & Voice Revenue Adjusted EBITDA ($ millions) Q1'16 Cloud & Data Centre Revenue Network and Voice revenue impacted by a variety of factors, including regional economic impacts, consciously allowing low value customers to churn, selected discounting for long-term renewals and lower usage revenues as certain customers move to unlimited usage plans Cloud and Data Centre revenue increased $210k sequentially, or ~20% annualized compared to Q % $3.7 Q1'15 31% $4.7 Q1'16 In Q1, 30% of total revenues came from Cloud and Data Centre segment Adjusted EBITDA increased 26.5% in Q1 16 compared to Q1 15 Driven by increased revenue from RackForce acquisition and synergies realized through integration 7

8 Capital Expenditures & Liquidity Capital Expenditures ($ millions) 19% Capital expenditures down $0.57 million in Q1 16 vs. Q1 15 $2.3 Q1'15 Capital Intensity - % Leverage (Debt / EBITDA) 2.53x 12% $1.8 Q1' x Lower capital expenditures mainly driven by timing of projects Q2 to include capital expenditures for additional investments to launch new products TeraGo maintains a strong balance sheet with the financial flexibility to achieve its strategy Leverage decreased to 2.36x in Q1 16 from 2.53x at Q4 15 Capital in place to execute on organic growth plan with $10 million in cash and a $10 million operating line Acquisition facility of $25 million 8 Q4'15 Q1'16

9 Objectives and Strategic Priorities Continue sales momentum in data centre and cloud services segment Launched TeraGo Cloud Drive; additional new cloud products scheduled to be launched in 2016 Leverage expanded collaboration with VMware to access new technology and enable faster time-tomarket delivery of enhanced VMware cloud based products Seek strategic acquisitions to accelerate growth Build upon successful acquisitions of RackForce and BoxFabric Strong pipeline of opportunities Maintain financial flexibility Capital in place to execute on organic growth plan ($10 million cash + $10 million revolver) $25 million acquisition facility available to access pipeline of potential opportunities Deliver strong financial results Achieve economies of scale as current cost structure able to drive strong growth with only success based, customer related investment TeraGo is Canada s Premier Enterprise Class Network, Data, Voice and Cloud Services Provider 9