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Enabling the Digital World in the Home 180 CONNECT INC. INVESTOR PRESENTATION

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180 CONNECT INC. INVESTOR PRESENTATION. Enabling the Digital World in the Home. Forward-Looking Statement. - PowerPoint PPT Presentation

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Page 1: Enabling the Digital World in the Home

Enabling the Digital World in the Home

180 CONNECT INC.INVESTOR PRESENTATION

Page 2: Enabling the Digital World in the Home

Forward-Looking Statement

This investor presentation contains forward-looking statements which reflect Management's expectations regarding the Corporation's future growth, results of operations, performance and business prospects and opportunities. Statements about the Corporation's future plans and intentions, results, levels of activity, performance, goals or achievements or other future events constitute forward‑looking statements. These statements reflect Management's current beliefs and are based on information currently available to Management. Forward‑looking statements involve significant risk, uncertainties and assumptions. Many factors could cause actual results, performance or achievements to differ materially from the results discussed or implied in the forward‑looking statements. These factors should be considered carefully and prospective investors should not place undue reliance on the forward‑looking statements. Although the forward‑looking statements contained in this investor presentation are based upon what Management believes to be reasonable assumptions, the Corporation cannot assure that actual results will be consistent with these forward‑looking statements.

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Table of Contents

I. Executive Summary

II. Business Overview

A. Satellite

B. Cable

C. Network Services

D. Digital Interiors – Home

III. Growth Opportunities

IV. Financial Overview

V. Conclusion

Page 4: Enabling the Digital World in the Home

Executive Summary

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180 Connect Overview

North America’s largest provider of installation, integration and fulfillment services to the home entertainment, communications, security and home integration service industries

Dominant player in rapidly growing industry

More than 3,300 highly-trained technicians and a fleet of over 3,000 Company-owned vehicles

Operates 85 branches across the United States and Canada

Performs approximately 2.5 million in-home visits per year

Only national contractor dedicated to the residential market

Scalable, market driven, technology centric operating service model

2006E Revenue and EBITDA of $316 and $14.0 million, respectively, representing revenue growth of 13% over 2005

180 Connect is in a position to leverage these dynamics to become a leader in the broader home services industry

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Page 6: Enabling the Digital World in the Home

The Critical Connection

Infrastructure

QUALITY

TECHNOLOGY

TRAINING

HUMAN

CAPITAL

Family of Companies

IronwoodDigital Interiors - Home

Digital Interiors – SecurityWirecommPiedmont

Network Services

Trend toward outsourcing

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Page 7: Enabling the Digital World in the Home

Business Transformation

Focus on Core Earnings and Cash Flow v. Revenue Growth

Intense analysis of technician efficiency, fleet utilization, use of sub- contractors and operating metrics

Local management compensation based on branch profitability

Significant focus on customer satisfaction experience, resulting in customer bonus eligibility

Balance Sheet Strengthening

Natural de-leverage of capital leases

As a result of prepaid insurance plan with current provider

Rebuilding True Partnership with Customers

DIRECTV desires greater throughput and customer satisfaction

Economic model rewards quality performance

Cable customers looking to expand 180 Connect within existing branch network

Develop New Programs associated with Core Assets – 2.5 million home visits per year

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Page 8: Enabling the Digital World in the Home

Diversified Service Offering

Demand for residential fulfillment has attracted 180 Connect to a variety of new customers

In home technical initiatives requiring fulfillment and integration positions 180 Connect well

Currently negotiating with potential new partners with Vonage, Slingbox and UControl

Digital Interiors – Consumer Electronics

Home integration services business that functions as a subcontractor to home builders and developers to install video, audio, security, telecommunications and data cabling in new homes

Developed through the acquisition of Digital Interiors in March 2005

Currently in California and Texas with expansion plans into the southwestern U.S.

Digital Interiors – Home

Provides fiber-to-the-home(“FTTH”) network design services and national construction and installation project management for developers, municipalities, commercial ventures and utilities

Division developed in 2005 with the addition of four fiber optic network engineers and 13 project managers, currently over 50 employees

High margin business with current backlog of contracts for approx. $5 million in 2007

Network Services

Performs satellite installations, upgrades and service calls for DIRECTV residential and commercial customers

54 branches, primarily in the western U.S., with approximately 2,800 technicians and 2,300 Company-owned vehicles (“COVs”)

Second largest of 13 members in the DIRECTV HSP Network

Formulating up-sell initiatives to enhance margins

Satellite

Performs residential cable installations, reconnections, disconnections, service upgrades and downgrades as well as general service calls

Operates in 28 branches, primarily in the eastern U.S., employing approximately 675 technicians

Growth in popularity of digital cable, VoIP, and data services are increasing the size of this business

Cable

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Page 9: Enabling the Digital World in the Home

Leading Provider of Outsourced Home Installation Services

Ability to manage large contracts which are geographically dispersed

One of the largest members of the DIRECTV Home Service Provider (“HSP”) Network of installers

Largest installation contractor of cable services for Cablevision and Rogers

Superior quality and customer satisfaction ratings

Recently awarded contracts with ONteriors and Boise Airport

Satellite dominates serviceoffering in western U.S.

Cable dominates serviceoffering in eastern U.S.

180 ConnectService Locations

Pro Line upsell, Digital Interiors and Network Servicesbusinesses can leverage the existing infrastructure

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Page 10: Enabling the Digital World in the Home

Large and Growing End-Markets

DIRECTV subscriber base projected to grow at a 7.7% CAGR from 15 million in 2005 to 22 million in 2010. DIRECTV reacting to the cable triple play with “partnered offerings” and heavily subsidized high definition equipment

Convergence of technology driving demand for additional installation services in the home, including “Triple Play” (voice, data and video) in the cable industry. Increased demand for fully integrated security offering into existing “Triple Play” platform

Strong upgrade trend from basic to digital cable

Introduction of a variety of other new technologies (e.g.,HDTV, DVRs, increased local channel access, foreign language programming) in both cable and satellite markets

Growth of “digital homes” wired for sound, security, and data combined with historically strong housing starts (in 2006 over 60% of the two million new homes built will have an advanced structured wiring feature built into the base specifications)

Market primed for consultative up-sell arising from the complexity of in-home technology which supports 180 Connects up-sell initiative.

180 Connect is well-positioned to enable the digital world in the home

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Page 11: Enabling the Digital World in the Home

Significant Operating Leverage & Margin Expansion Opportunity

Recent investments in infrastructure, personnel and vehicles position the Company to realize the benefits of significant growth opportunities

Centralized back-office and off-shore call center operations

Fleet of over 3,000 Company-owned vehicles

Additional margin expansion opportunities available through product and market synergies, further benefits of scale, the elimination of redundant corporate overhead and improved insurance rates

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Page 12: Enabling the Digital World in the Home

Strong, Experienced Management Team

Over 150 years of combined experience primarily in the satellite, cable and telecommunications industries

Proven record of successful entrance into adjacent markets with rapid revenue growth

Peter GiacalonePresident & CEO

25 Years of Experience

Nick WainwrightPresident – Cable

20 Years of Experience

Steven WestbergCFO

30 Years of Experience

Brian DalmassPresident –

Digital Interiors and Network Services

20 Years of Experience

Ed NollingerSenior VP – Business

Operations34 Years of Experience

Zachary McGuirePresident – Satellite

15 Years of Experience

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M. Brian McCarthyExecutive Director

35 Years of Experience

Page 13: Enabling the Digital World in the Home

Recently Completed Initiatives

Deployed over 2,200 new Company-owned vehicles in 2005

Launched Network Services, a fiber network engineering line of business that has earned significant new contracts

Acquired Digital Interiors

Consolidated all back-office functions to one shared service center

Relocated a portion of call center operations off-shore

Upgraded technical skills of over 3,300 technicians

Recruited top IT professionals enhancing controls and financial reporting

Initiated remote technician dispatch

Initiated regionalized dispatch operations

Completed the re-financing of the Company’s long term debt

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Page 14: Enabling the Digital World in the Home

Business Overview

Page 15: Enabling the Digital World in the Home

Satellite

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Satellite

Completed POV/COV conversion, acquired 2,000 DIRECTV compliant vans and hired 950 technicians

Completed outsourcing of approximately 60 CSR’s to Philippines, resulting in $100,000 monthly savings

Initiated remote technician dispatch resulting in reduced fuel and overtime expense

Initiated regionalized dispatch operations resulting in reduced headcount

DIRECTV rate card increases in California

Accomplishments

DIRECTV 2006 4% rate cut offset with 12% increase in volume. Additional 150,000 installations forecast by Ironwood in 2006

DIRECTV currently re-evaluating rate card and work rule structure for the entire network

HSP network grows to approx.80% (up from 60%) of DIRECTV

Revenue growth in 2005 of approx. 33% expected to increase 9% in 2006

Over 2 million truck rolls per year

DIRECTV implements bi-weekly fulfillment pay

Assumptions

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Page 17: Enabling the Digital World in the Home

Cable

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Cable

Became largest installation contractor for Cablevision, ramping up to a total of 225 technicians in 2006

Launched new operations for Time Warner in Greensboro and WOW in Detroit all of which contributed to earnings in 2006         

Rebuilt New Orleans and Beaumont operations after Hurricane Katrina/Rita. Currently “prime” contractor for Cox/Time Warner

Wirecomm Systems (servicing Rogers Communications, Canada) turnaround achieving 25% revenue growth and significantly improved earnings

Re-organized the cable division into logical operating units

Accomplishments

Modest in-branch growth supporting MSO triple-play needs

Revenue growth of approximately 35%

Significant opportunities exist for additional technician growth outside of existing branch network

Growth in popularity of digital cable, VoIP, and broadband services are increasing the size of the business

Assumptions

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Page 19: Enabling the Digital World in the Home

Network Services

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Network Services

Entry into growing FTTH market with little up front development costs

Launched operations in Q4 2005 via transition of four engineers and 13 project management support personnel from Tetra Tech. Now operates with over 50 personnel

Transferred existing contracts totaling approximately $2 million

Accomplishments Budgeted existing backlog only –

upside revenue potential

High margin business – 20% to 25% achievable with scale

New Contracts with for the City of Ontario, California and Santa Clara, California and Boise Airport

Significant acceptance and interest from developer community for Network Services offering:

Planning and network engineering

Network construction and management

Customer drops to the home

Content and communication services (video, voice, data, security)

Network monitoring and operations, providing recurring revenue

Assumptions

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Page 21: Enabling the Digital World in the Home

Digital Interiors – Home

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Digital Interiors – Home

Completed acquisition in March 2005

Consolidated and integrated operations into Denver operations hub

Rationalized sales organization

Developed relationship with ONteriors in Phoenix and Houston

Accomplishments

Compliments Network Services division – one point of contact for municipalities, developers and builders

Respond to requests to expand presence with national and regional home builders

Estimated that in 2006, 60% of the 2 million homes built will have advanced structured wiring built into the home’s base package

Areas of expansion include monitored security, communications, distributed audio and home theater

Assumptions

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Page 23: Enabling the Digital World in the Home

Growth Opportunities

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Growth Opportunities

Cable and satellite operators are increasingly outsourcing residential services to professional installers

Strong DIRECTV subscriber growth and cable subscriber churn will continue to drive increased installation volume

180 Connect has earned significant DIRECTV customer satisfaction bonus’ in 2006 and is consistently ranked number 2 or 3 in the HSP network

Increased demand for new products and technology upgrades will result in additional upgrade truck rolls

Leverage infrastructure into complementary services

DIRECTV CableNetwork Services

Digital Interiors

Pro Line Upsell

New Services New Services

180 Connect has positioned itself for significant growth driven by a combination of opportunities across each of its business components

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Page 25: Enabling the Digital World in the Home

Financial Overview

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Historical and Projected Revenue

$318.6

$280.7

$211.8

$86.0

$0

$100

$200

$300

$400

$500

2003 2004 2005 2006E

($ in millions)

2004-2006E CAGR: 22.65%

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Page 27: Enabling the Digital World in the Home

Historical and Projected EBITDA

($ in millions)

$4.1$5.6

$1.0

$12.7

$4.1

$11.4$13.8 $14.0

$0.0

$10.0

$20.0

$30.0

$40.0

2003 2004 2005 2006E

EBIT

DA

Reported EBITDA Adjusted EBITDA

2004-2006E CAGR: 50.6%

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Page 28: Enabling the Digital World in the Home

2005: A Year of Transition

Rapid growth – significant growth related costs Deployed 2,200 new service vehicles and 950 new field technicians

Upgraded technical skills of over 3,300 technicians

Recruited top IT professionals to focus on work order and supply chain systems

Consolidated back office functions in Denver

Settled Mountain Center acquisition liabilities and several longstanding DOL claims

Company repositioning – five operating lines of business poised for contribution Launched Network Services and integrated Digital Interiors

Relocated major portion of call center operations off-shore

Launched Pro Line upsell

Positioned for strong future growth Maturity of growth related costs behind us

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EBITDA Margin Improvement Initiatives

ReducedSubcontractorRate Card &

Strategically DeployBased on Seasonal

Trends

Fleet Conversion

G&ACost Reduction

Safety Training- Improved Insurance

Trends

ImprovedConsumable

Sourcing

Off-Shore CallCenter

Direct Sales

Margin Improvement

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Technician Up-Sell Program

Proline

Page 30: Enabling the Digital World in the Home

Balance Sheet Strengthening

Refinancing Completed

Debt refinance of up to a maximum of $57 million of debt available comprising a revolving credit facility and a term facility with interest rates ranging from prime plus 3% to prime plus 5%.

Excludes $32.7 million of capital lease obligations

Recently completed $10 million refinancing of fleet resulting in $2.1 million of incremental cash flow

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Page 31: Enabling the Digital World in the Home

Balance Sheet Summary

($ in millions)

(1) Long-term debt includes current portion.(2) Capital lease obligations includes current portion.

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($ in millions) UNAUDITEDAs of: 12/31/04 12/31/05 09/30/06

ASSETSCash and Cash Equivalents 28.5 3.4 0.5Accounts Receivable, Net 43.9 50.0 45.5Inventory 17.8 20.3 17.8Restricted Cash 6.1 14.8 14.5

Prepaid Expenses and Other Current Assets 0.7 1.4 1.7 Total Current Assets 97.0 89.9 80.0Property and Equipment, Net 3.0 41.7 39.4Goodwill 15.4 15.5 15.5Customer Contracts, Net 35.8 29.0 26.2Other Long-Term Assets 8.3 1.7 8.0 Total Assets 159.5 177.6 169.0

LIABILITIES & SHAREHOLDS' EQUITYAccounts Payable 4.0 8.9 7.2Accrued Liabilities 67.2 67.8 62.1 Total Current Liabilities 71.2 76.7 69.3Long-Term Debt (1)

50.7 40.0 39.9Capital Lease Obligation(2)

0.4 34.9 29.6Convertible Debt - - 7.7Other Long-Term Liabilities 5.1 1.6 1.5Shareholders' Equity 32.0 24.5 21.1 Total Liabilities and Shareholders' Equity 159.5 177.6 169.0

AUDIT

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Capital Expenditures and Working Capital

Capital expenditures, excluding fleet purchases, projected to be between $2.6 million and $2.5 million annually over next three years

Capital expenditures relate primarily to supporting the Company’s IT initiatives

The Company also transitioned to a Company-owned vehicle model, resulting in purchasing 2,200 new vehicles to replace privately-owned vehicles

Capital Expenditures Summary

$1.3$1.9

$5.7

$2.6

$0

$1

$2

$3

$4

$5

$6

2003 2004 2005 2006E

($ in millions)

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Conclusion

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Investment Highlights

Leading Provider of Outsourced Home Installation Services One of the largest members of the DIRECTV Home Service Provider (“HSP”) Network of installers Largest installation contractor of cable services for Cablevision and Rogers Superior quality and customer satisfaction ratings

Large and Growing End-Markets DIRECTV subscriber base projected to grow at a 7.7% CAGR from 15 million in 2005 to 22 million in

2010 Convergence of technology driving demand for “Triple Play” (voice, data and video) service installations

for the cable industry Strong upgrade trend from basic to digital cable Growth of “digital homes” wired for sound, security, and data combined with historically strong housing

starts (in 2006 over 60% of the two million new homes built will have an advanced structured wiring feature built into the basic specifications)

National Footprint/ Leverageable Network Over 3,300 highly-skilled, highly-trained technicians completing approximately 2.5 million in-home visits

per year Highly leverageable branch network capable of supporting a multitude of home services (e.g., security,

data networking, home theater, communications) 85 branch locations across the U.S. and in Ontario, Canada

Significant Operating Leverage & Margin Expansion Opportunity Recent investments in infrastructure, personnel, and equipment position the Company to realize benefits

of significant growth opportunities Centralized back-office and off-shore call center operations Fleet of over 3,000 company-owned trucks Additional margin expansion opportunities available through product and market synergies, further

benefits of scale, the elimination of redundant corporate overhead and improved workers’ compensation insurance rates

Strong, Experienced Management Team Senior management has over 150 years of combined experience primarily in the satellite,

cable and telecommunications industries Proven record of successful entrance into adjacent markets with rapid revenue growth

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Fact Sheet – As at September 30, 2006

Symbol: NCT.U (TSX)

Shares: 24.4 million basic

Debt:

Long Term: $39.9 million (includes current portion)

Convertible Debt: $7.7 million

Capital Leases: $29.6 million

Cash: $0.5 million

Restricted Cash: $14.5 million

Technicians: 3,300

Branches: 85

Website: www.180connect.net

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