A focused discussion regarding Business Infrastructure Services and Business Network Services. December 2, 2015

Transcription

1 A focused discussion regarding Business Infrastructure Services and Business Network Services December 2, 2015

2 Forward Looking Information Statements included in this presentation that are not historic constitute forward-looking statements. Forward-looking statements are based on assumptions and involve risks and other factors which may cause actual results to be materially different from views expressed or implied by such statements. Accordingly, forward-looking statements are not guaranteed and undue reliance should not be placed on them. Material risks and other factors that could cause actual results to differ materially from the views expressed in forward-looking statements and material assumptions underlying forward-looking statements are identified in the Company's Management s Discussion and Analysis for fiscal 2015 which has been filed with the Canadian securities regulatory authorities and the U.S. Securities and Exchange Commission. 1 1

3 In April 2014, we announced a new organizational structure as part of our Focus to Deliver multi-year program to enhance efficiency, productivity and improve customer service capabilities Key outcomes driving this program include an improvement in customer satisfaction, an effective customer-centric organization and a cost structure that enables future growth and high employee engagement of top talent 2

4 3 Shaw closed the ViaWest transaction of US$1.2B effective September 1, 2014 and rebranded as Business Infrastructure Services ( BIS )

5 4 Shaw Business Infrastructure Services Investor Presentation December 2, 2015

6 Management Team Nancy Phillips Founder President & CEO Mike Krza Peter Strauss Jason Carolan Dave Leonard Jeff Gaillard Jason Nance Senior Vice President Sales Chief Financial Officer Chief Operating Officer Chief Technology Officer Chief Data Centre Officer Chief Marketing Officer Relevant Industry Experience 30 Years 16 Years 10 Years 15 Years 33 Years 15 Years 20 Years Prior Company Experience Co-founder of ViaWest; various successful entrepreneurial enterprises (i)structure 5

7 Company History Detailed Company Growth History Start-Up Years Beyond Denver Achieving Scale Strategic Transition Platform Expansion : Company Founded in Denver, CO as ISP roll-up 2002: Reached breakeven EBITDA and launched managed services platform 2004: Expanded into Utah market (second market) 2005: Launched additional managed services, including metrics performance reporting, business continuity, and managed hosting solutions 2006: Opened fifth facility in Salt Lake City, Utah 2006: Entered Portland (third market) with acquisition of Fortix 2007: Opened second downtown Denver facility and fourth data centre in Colorado (Cornell) 2007: Increased footprint in Utah with addition of Cottonwood facility 2008: Acquired Dataside LLC, expanding footprint to 15 data centres across five states (fourth, fifth and sixth markets) 2009: Opened fifth data centre in the InfoMart (sixth data centre in Dallas metropolitan area) 2010: Oak Hill Capital Partners and GI Partners acquired ViaWest 2010: Completed two acquisitions (Consonus and SingleEdge) adding four new data centres in Utah 2011: Opened Hillsboro II data centre in Oregon 2011: Opened Synergy Park data centre in Richardson, Texas 2013: Expanded into Minneapolis (seventh market) 2013: Opened Lone Mountain data centre in Las Vegas 2013: Expanded into Phoenix (eighth market) through partnership with Cox 2014: Opened phase I of the Minneapolis data centre 2014: Opened phase I of the Compark data centre in Denver 2014: Acquired by Shaw 2015: Launching third data centre in greater Portland market 2015: Expanded into Calgary, Canada (ninth market) 2015: Acquired Applied Trust to enhance our security and compliance offering 2015: Acquired INetU a premier Cloud and Managed Service provider on the US East coast 6

8 Market Trends Shift in customer demand to hybrid services positions ViaWest well for growth Managed and cloud services remain drivers of margin expansion for colocation providers Integrated offering of managed and cloud complements colocation driving cross-sell opportunities Improves customer stickiness and drives value of customer relationship Cloud offerings expand geographic customer footprint beyond existing markets Market continues to redefine itself Large IaaS providers (e.g. Amazon and Google) lead the market in lower-end / commodity hosting Customers infrastructure purchasing decisions less defined by traditional retail versus wholesale and more based on the actual applications they re managing, with very specific requirements Providers looking to differentiate by offering full suite of services to meet wide range of customer needs Geographic reach and interconnection / network density playing an increasingly vital role Significant recent M&A activity across the industry, driven primarily by strategic buyers Recent acquisitions include TierPoint / Windstream Hosted Solutions, Digital Realty / Telx, Equinix / Telecity, CyrusOne / Cervalis, QTS / Carpathia, Zayo / Latisys 7

9 Significant Investment Opportunity Continued investment in core growth initiatives to address the high demand for IT outsourcing Core Growth Initiatives Expansion within our existing footprint Oregon Texas M&A expansion into new products, services and geographies Applied Trust INetU Greenfield market expansion Calgary ($US B) $80 $70 $60 $50 $40 $30 $20 $10 - Data centre and Cloud revenue growth forecast ( ) % F 2016F 2017F 2018F Colocation Managed Hosting Public Cloud Private Cloud 8 Note: Represents North American revenue growth; "Cloud" refers to Cloud IaaS Source: Gartner Forecast: IT Services Worldwide (4Q14 Update)

10 Select Players ViaWest in the Infrastructure as a Service (IaaS) Landscape ViaWest offers a comprehensive suite of world class data centers and an IaaS portfolio of Colocation, Dedicated Private Cloud, and Virtual Private Cloud all wrapped under a broad range of managed services and a customer centered support experience Hybrid capabilities allows for fully differentiated, customizable offering that serves customers up and down the stack, improving customer retention and margins Wholesale Colocation Managed Hosting Cloud - IaaS 9

11 Business Infrastructure Services (BIS) Leveraging Reputation, Expertise and Brand - Competes in the US data centre and cloud market - Branded to leverage strong ViaWest expertise and track record - Competes in the CDN data centre and cloud market - Leverages Shaw brand and network with ViaWest expertise Managed by ViaWest management team with responsibilities over all North American business infrastructure service offerings Co-Branded in Canada to leverage the strong brand image and reputation of Shaw Communications BIS investment provides Shaw with a growth platform in the attractive data centre sector and expands on existing technology offering for mid-market enterprises in the US and Canada 10

12 Geographic Reach and Comprehensive Capabilities 30 Data centres in 10 regions Seattle, WA Calgary, Alberta London Amsterdam 9 cloud sites throughout North America and Europe Portland, OR Minneapolis, MN Industry leading PUE for multitenant data centres Las Vegas, NV Salt Lake City, UT Denver, CO Allentown, PA Richmond, VA 120 MW power capacity 100% SLA and satisfaction guarantee Phoenix, AZ Dallas, TX Austin, TX Hybrid IT Solutions Comprehensive Suite of Solutions Colocation and Network Services Cloud Solutions IT Consulting Security and Compliance Private Cloud Public Cloud Enterprise End-Users Traditional IT 11

13 What Makes ViaWest Different IT Builders Serve as Architects Walking Customers Through the Entire IT Spectrum Hybrid Solutions Future-Proof IT Decisions with Optionality for Colocation, Cloud, & Managed Services Operational Superiority Lead the Industry Enabling Customers to Meet Regulatory Responsibilities Flexible Individualized Solutions Aligned with Our Customer s IT Strategy Local Infrastructure Agnostic Trusted Operator with Local Presence and Expertise 12

14 Building Scale and Expertise Applied Trust is a comprehensive IT professional services firm specializing in security, compliance, infrastructure and devops consulting North American customer base in healthcare, finance, education, and government Provides critical security infrastructure management and design services 13 INetU is a managed cloud and dedicated hosting provider to enterprise customers headquartered in Allentown, PA Internationally diversified customer base across compliance sensitive industries including retail, healthcare, SaaS & software and financial services Provides a full-suite of managed services including solutions for private cloud, multitenant cloud, managed dedicated servers, and hybrid cloud environments including AWS in the US (VA, WA) and Europe (Amsterdam, London) Industry leading customer satisfaction rating (NPS 74)

15 Platform Agnostic Hybrid Service Offering Expertise around a spectrum of IT infrastructure solutions allows ViaWest to provide individually tailored services to support a diverse set of customer needs INetU investment bring scale and expanded product offerings to our Cloud and Managed Platform Colocation investments in Oregon, Calgary and Texas build on our infrastructure foundation Applied Trust expands our reach into our customers IT roadmap Private Cloud Public Cloud Cloud DRaaS Complianc e Applied Trust Consultin g Security Space and Power Network and Bandwidt h Remote Hands 14

16 ViaWest Representative Customers ViaWest has a wide variety of satisfied customers across industry segments as well as enabling leading SaaS and IaaS providers Services Retail / Manufacturing Entertainment / Hospitality Financial Government / Non-Profit Communications / Technology Education Healthcare 15

17 Revenue Diversification and Visibility (1) MRR by Market Oct 2015 Customer Count by MRR Oct 2015 MRR by Customer Rank Oct 2015 $20k - $100K 7% $100K+ 1% TX 20% UT 16% AZ 6% CO 39% $5k - $20K 16% $0 - $1k 47% Top % Other 12% Top 3 12% Top % Top % OR 9% NV 8% MN 2% $1k - $5k 29% Top % Top % Stable Recurring Revenue Class Contract Counts MRR % Share Avg. Contract MRR < 1 year 7% > 3 years % US$18,387 > 3 years 32% 1 3 years < 1 year 1, % 7% US$6,409 US$1,332 1 year - 3 years 61% 16 (1) ViaWest customers in US$

18 2015 Financial Review ViaWest vs Foreign Canadian $'s in millions ViaWest ViaWest Exchange Operations BIS vs 2014 US$ US$ C$ C$ C$ Revenue $184 $203 $43 - $246 10% Adj EBITDA $76 $83 $18 ($6) $95 10% CapEx $88 $91 $21 $40 $152 4% FCF (1) ($12) ($8) ($3) ($46) ($57) na Strong finish to year with Q4/F15 MRR bookings of US$1.1 million, largest in history of the Company, generating strong momentum into fiscal year 2016 Q4/F15 ViaWest revenue and EBITDA grew 11% and 15%, respectively from prior year For fiscal year 2015, ViaWest revenue and EBITDA both increased by 10% over fiscal year 2014 ViaWest EBITDA growth of 12% after adjustments for one-time legal expenses and longer-term incentives ViaWest capital expenditures totaled US$91 million in 2015, which was largely attributed to expansion capital for the new Brookwood (OR) facility, existing facility augmentations and customer installations ViaWest maintenance capital as a percent of revenue was 1.6% and 2.1% for 2014 and 2015, respectively 17 (1) FCF is unlevered (i.e. no interest, no taxes)

19 US$'s in millions Investing in Future Cash Flow Platform for Investment vs Expanding EBITDA margins and low maintenance capital drive strong operating FCF $120 $100 $80 ViaWest Operating FCF EBITDA less Maintenance Capital 50% 45% 40% 35% Management expects continued investment to meet market demand +/- US$10M in simple free cash flow for ViaWest $60 $40 $20-30% 25% 20% 15% 10% Strong operating FCF sustainable with minimal customer and expansion capital Approximately 60% of bookings from existing customers 2014A 2015A 2016F Operating FCF Expansion Customer % of Revenue Calgary1 is designed to replicate what we have created in the US Start of Canadian initiative results in initial investment of C$40M in F2015 Historically new market initiatives produce an EBITDA break even in 5 to 7 quarters Operations commenced in Q2/F16 18

20 Built For Long-term Sustained Growth Strong Industry Fundamentals Well Positioned in Attractive, Regional Markets Attractive Recurring Revenue Model Strong Relationships with Diversified Customer Base Strong Historical Financial Performance High Quality Infrastructure and Operations Experienced Management Team Demand growth outpacing supply growth Growth in internet usage and mobile applications continues to drive demand for capacity Continued shift to outsourced data centre operations Mission critical nature of service provided creates barriers to entry Operates 30 facilities across ten regional markets Regional markets have lower threat of new entrants and fewer competing facilities Scale and leadership position creates competitive advantage Robust revenue backlog with committed contract minimums 95%+ of revenue is contractually recurring, with average contract length of three years Low revenue churn of ~0.8% per month Approximately 2,000 customers with limited customer or industry vertical concentration Approximately 2/3 of bookings are from existing customers, driving revenue growth (net of churn) prior to any new customer wins Consistent organic revenue and EBITDA growth with improving margins CY PF revenue and EBITDA CAGR of 14.1% and 16.8%, respectively Combined company EBITDA margin of over 40% Facilities fully equipped to ensure full and uninterrupted access to and transmission of data 24x7x365 support provided by ViaWest s engineers Industry leading reputation for infrastructure and network uptime Seasoned senior management team with deep industry and market experience Demonstrated track record of successful execution and results Average of ~20 years industry experience 19

21 20

22 Market: Review outlook on the business telecom market Customer: Share customer insights and segmentation Starting point: Recast Shaw Business starting point Strategy: Align on overarching strategy pillars to support it Program: Outline the detailed initiatives to support this strategy Update: Share results to-date 21

23 Shaw Business Network Services ( BNS ) represents a significant growth opportunity and we are making the transition and appropriate investments to capitalize on the market segments we are focused on Small Office Home Office ( SOHO ) and Small Medium Business ( SMB ) Drive penetration in SOHO/SMB markets with disciplined go-to-market execution and investments in team and network Capture share of wallet with SMB/Small Enterprise markets by filling core product gaps Expand into select segments of high growth data centre and managed services markets Core Canadian business telecom market is projected 1 to grow ~2% p.a. over next 5 years Data and internet usage expanding, but facing new competitors and commoditization pressures Voice revenue will continue to decline as it becomes an OTT application $ in millions Core 1 Satellite 2 Total Core Satellite Total Core Satellite Total Revenue $ 405 $ 79 $ 484 $ 442 $ 78 $ 520 9% -1% 7% EBITDA $ 203 $ 37 $ 240 $ 223 $ 34 $ % -8% 7% Margin 50.1% 47.0% 49.6% 50.3% 43.5% 49.3% 1. Core Business includes SMB, Enterprise and Wholesale 2.Satellite includes Shaw Broadcasting and Shaw Tracking F2014 F2015 growth Solid Y/Y growth in both Revenue and EBITDA for our Core Business at 9% and 10% respectively High margins remain consistent 22

24 Industry Landscape Customer Insights Shaw Business Overview of Strategy Update 23

25 Core business growing slowly; software, data centre, managed services projecting high growth Annual Canadian business telecom/it spend ($B) Core wireline products projected to grow slowly More advanced services such as managed network and data centre projected to grow much faster Includes Office Suites, CRM, Web conferencing, collaboration and social suites Source: IDC, Gartner, BCG analysis

26 Changing core product focus towards data IT outsourcing on the rise Data demands expanding... Traffic growing 20%+ p.a. ~20% more SMBs expect to use fiber/ethernet in 5 years Voice becoming an app subs and pricing will continue to erode 2/3rds of SMBs use or plan to use OTT voice 29% 1 of SMBs using SIP OTT provides more features at lower costs 1. Among those SMBs with trunking solutions Managed service adoption high, even among SMBs ~50% of SMBs using managed IT and managed network/ security ILEC/MSOs seen as reliable managed service provider 40% of SMBs would consider telecom provider as a vendor of managed services Quality service vital to win, especially in managed services 95% of CIOs said they would switch providers for better service 25

27 26 Source: BCG IT Decision Maker Survey 2014 (n = 500), Shaw documents, BCG interviews, BCG analysis

28 Question: What new products would you buy from a telco? 27 Source: BCG CIO Interviews

29 Industry Landscape Customer Insights Shaw Business Overview of Strategy Update 28

30 Small businesses, on average, require fixed internet for ~70% of FTEs and fixed phone for ~50% Many businesses, including 70% of those with a mobile workforce, express interest in Go WiFi The online channel is the most important channel for reaching these businesses: 30% prefer online Similar to consumer, self serve will be a vital part of long-term strategy Managed service uptake is already high, even among smaller businesses ~75% of SMBs already use managed services and nearly half of SOHOs Data centre uptake is lower among SOHOs (35%) and SMBs (57%) vs. Enterprises (>75%) The key drivers of customer purchase are fairly balanced it isn't just about cost 26% cite cost as the most important driver, but quality (23%) and security (20%) are quite important 29

31 30 Source: BCG IT Decision Maker Survey (US and Canada, Dec 2014)

32 31 Source: BCG IT Decision Maker Survey (US and Canada, Dec 2014)

33 ~1/3rd of businesses have switched providers in the past five years Source: BCG IT Decision Maker Survey (US and Canada, Dec 2014) 32

34 Industry Landscape Customer Insights Shaw Business Overview of Strategy Update 33

35 34 Leveraging our core network asset to bring unique products and services to our target markets

36 Covering core and near-core telecom services, data centre and cloud 2013 Canadian business telecom/it spend ($B) Wireline Voice, Data, Internet. Data centre and Cloud and Managed Network adjusted to reflect typical division of telecom spend by province. (32% of Canadian telecom spending occurs in BC, AB, MB, SK). 2. Wholesale adjusted to remove wireless wholesale, and adjusted to reflect Western Canada. Source: IDC, Gartner, BCG analysis

37 Revenue (Ms) Significant opportunity exists within our current footprint 1,600 Western Canada wireline revenue 1,400 1,200 1, SOHO/SMB Corporate Enterprise 36

38 37

39 38

40 Industry Landscape Customer Insights Shaw Business Overview of Strategy Update 39

41 40 Develop best in class business experience that is positioned for long term growth

42 Hosted/ mngd DC services Enhanced Voice Managed Network / Security Managed WiFi 1. Based on market size, growth rates, competitiveness and industry trends. Source: Customer/Expert interviews; Cisco market analyses; BCG Analysis 41

43 Opportunity Trusted Advisor Sales Customer Support Convenience Connected & Secure Switch & Save Enhanced Voice Cloud based Storage & Services Managed WiFi Advanced Security Access to Shaw Go WiFi Pricing Promotion 42

44 Industry landscape Customer insights Shaw Business Overview of strategy Update 43

45 44

46 45

47 46

48 47