2015 Q3 Earnings Conference Call TeraGo Networks Inc.

Transcription

1 2015 Q3 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, availability of comprehensive solutions to meet customers IT needs, 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, data center and cloud services sales momentum and future financial results. By their nature, forwardlooking 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 forward-looking 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 adding high value clients not continuing, delays in new product launches impacting sales, 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, cross-selling of TeraGo s products and services may not succeed, 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, 2014 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 Successful Implementation of Transformational Plan TeraGo s transformational plan introduced in Q has been successfully implemented Business has been successfully transitioned from a network services provider to an end to end data solutions provider Product set has been expanded into data centre and cloud services Full suite of IT solutions available to serve enterprise customers Data sovereignty protection One throat to choke service provider for all customer needs Superior customer service 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 Net Result is TeraGo s Emergence as Canada s Premier Enterprise Class Network, Data, Voice and Cloud Services Provider 4

5 Q Highlights Achieved record, quarterly revenue of $15.3 million Achieved record, quarterly EBITDA of $5.3 million EBITDA margin of 35% in the quarter Driven by realized synergies above our initial expectations from RackForce acquisition and other operational improvements Strong growth in the Cloud and Data Centre segment Segment organic revenue growth of 8.3% compared to Q2 15, while accounting for 27.3% of total revenues Several large enterprise clients installed during the quarter Total revenues up 1.1% compared to Q2 15 and up 21.7% year-over-year Successfully closed the acquisition of BoxFabric, an Ottawa-based cloud and managed services provider Addition of numerous customers including federal and provincial government entities, hospitals, nonprofit organizations and private enterprises Expands data centre infrastructure with a Tier 3 facility in Ottawa 5

6 Joe Prodan Chief Financial Officer

7 Revenue Revenue ($ millions) $15.1 $15.3 $12.5 $3.9 $4.2 $0.8 $11.7 $11.3 $11.1 Total revenue increased 21.7% in Q3 15 compared to Q3 14 Cloud and Data Centre revenue increase of $3.3 million driven mainly by acquisition of RackForce Continued success in Cloud and Data Centre revenues with 8.3% growth sequentially Additions large enterprise clients occurred in the quarter In Q3, 27% of total revenues came from Cloud and Data Centre segment Q3'14 Q2'15 Q3'15 Network & Voice Revenue Cloud & Data Centre Revenue 7

8 EBITDA EBITDA ($ millions) 33% 30% 35% $5.3 EBITDA increased 30.1% in Q3 15 compared to Q3 14 and 17.3% sequentially Increase in EBITDA driven by: Increased revenue $4.1 $4.5 Synergies realized from the acquisition of RackForce Restructuring efforts Margin expansion due to new Cloud and Data Centre clients installed into existing capacity Q3'14 Q2'15 Q3'15 EBITDA Margin - % Investments being made in the Cloud and Data Centre business through increased headcount Capitalize on strong growth in sector 8

9 Capital Expenditures Capital Expenditures ($ millions) 28% 20% $3.6 $3.1 10% $1.6 Decrease in capital expenditures compared to both Q3 14 and Q2 15 Lower than normal capital expenditures mainly driven by timing of projects Q4 to include capital expenditures for additional storage to support cloud opportunities and additional investments to launch new products Lower Network & Voice capital expenditures due to focus on more profitable wireless sales and increased efficiencies Q3'14 Q2'15 Q3'15 Capital Intensity - % 9

10 Objectives and Strategic Priorities Continue sales momentum in data centre and cloud services segment New cloud products scheduled to be launched in Q4 15 and Q1 16 Focus on new cloud storage products and new virtualization product stacks Seek strategic acquisitions to accelerate growth Completed BoxFabric acquisition Robust pipeline of opportunities remains Maintain financial flexibility Optimizing liquidity and the availability and cost of capital a key priority Capital in place to execute on organic growth plan ($11 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 Compensation tied to performance; revenue growth; increasing retention; positive free cash flow; net promoter score TeraGo is Canada s Premier Enterprise Class Network, Data, Voice and Cloud Services Provider 10