Investor Presentation - ASX2017/02/03 · Investor Presentation Acquisition of Hostworks Group Pty...

Investor PresentationAcquisition of Hostworks Group Pty Ltd

February 2017A leading Managed IT, Cloud and Communications provider to SME’s, corporates and consumer brands across Australia. We invest in our people, products and automation to make it easy for our customers to do business.

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2INABOX GROUP LIMITED | ACQUISITION OF HOSTWORKS | FEBRUARY 2017

Some of the statements in this presentation constitute “forward-looking statements” that do not directly or exclusively relate to historical facts. These forward-looking statements reflect Inabox Group Limited’s current intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors, many of which are outside Inabox Group Limited’s control. Important factors that could cause actual results to differ materially from the expectations expressed or implied in the forward-looking statements include known and unknown risks. Because actual results could differ materially from Inabox Group Limited’s current intentions, plans, expectations, assumptions and beliefs about the future, you are urged to view all forward-looking statements contained in this presentation with caution. This investor presentation may not be copied or otherwise reproduced.

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Inabox Group Limited to Acquire 100% of Hostworks Group Pty Ltd

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1. Gartner 2016.2. Telsyte.

Matching IAB’s distribution capability with Hostworks’ managed cloud platform.

Strategic Rationale

Strengthens Cloud Offering • Fast-tracks IAB cloud strategy • Expands capabilities to

encompass new services

Low Multiple Acquisition • Acquired at Post-Synergy FY18

EBITDA multiple of < 2x

Earnings accretive in FY18 • Additional FY18 NPAT

of $1.2m anticipated

Positions IAB to capture rapidly growing & shifting market • IaaS market growing at 30%+ annually 1

• $1.049b Australian market by 20202

• 17% of IT Services migrating to the cloud annually1

Strengthens revenue model • Additional revenue from

Hostworks is over 90% recurring • Increases combined group

revenue to over $110m in FY18, with 86% recurring

Cross-Selling Opportunities • Cloud services to IAB’s existing

2,000+ managed IT and wholesale customers

Significant synergies realised • Approx. $3m in pre-tax synergies,

majority realised in 2nd half FY17 • Restructure costs of approx.

$700K in FY17

Long tenured, blue chip customers • Average tenure of 8.2 years

for top 20 customers

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Item Detail

Purchase price • $7m for 100% of Hostworks Group Pty Ltd (HW)

Purchase price consideration • $5m cash payment upfront

• $2m cash payment deferred and payable over 18 months

Balance Sheet • Acquired on cash free/debt free basis

Multiples • < 2x annualised, post-synergy FY18 EBITDA

• Excludes restructure costs which are accounted for in FY17

Contribution • Additional FY18 EBITDA $3.6m, NPAT $1.2m

Shareholder Value • EPS accretion of approximately 6 cents

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A provider of managed IaaS and solutions, including managed hosting and cloud migration consulting to Australian SMEs and Corporates

Hostworks Snapshot

Company • Established 1999 • Operations centre in Adelaide • Corporate office located

in Sydney

CustomersBlue chip customer base including Seek, Carsales, Ticketek, Foxtel, AHL, Seven Media

Data CentreData centres in Kidman Park, Adelaide (140 racks) and Equinix Sydney (40 racks)

Shareholders100% owned by BAI Communications Pty Ltd

Staff92 full-time employees including 78 digital solutions engineers and experts

Financials • FY16 Revenue $22m

(90% recurring) • FY16 EBITDA $0.5m

NOC24/7 network operations centre (NOC) in Kidman Park, Adelaide

Business • Managed hosting of high-availability

customer facing digital platforms, co-location and digital media solutions.

• Expert manager of digital events.

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Fully flexible managed hosting and operationsPublic clouds, hybrid clouds and dedicated environments

Helps customers understand their digital presenceEnd-user experience and performance monitoring, analytics and Business Intelligence

Digital consulting and supportTechnical consulting, project management, data centre migration, performance analysis and improvements, capacity planning and testing, benchmarking

Dashboard and self-service portalTicketing, collaboration, provisioning, reporting, SSO

Application development and maintenanceCMS, CRM, ecommerce or back office systems

Platform-as-a-Service for live and on-demand video and rich media

A range of productised solutions

Product OfferingF

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Long standing major customersF

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0.01 2 3 4 65 87 109 1211 1413 1615 1817 2019

FY16 Revenue

0.5

1.0

1.5

2.0

2.5

3.0

3.5 ($m)

0

2

4

6

8

10

14

12

18

16

Tenure and Spread – Top 20 Clients

Avg. Tenure Tenure (Yrs)

(Years)

Minimum key client risk

Average 8.2 year tenure for top 20 customers

Average tenure 8.2 years

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FY16 revenue of $22 million 90% of revenue is recurring Long standing clients

Hostworks FY16 Revenue

90% Hosting recurring

FY16 Revenue Analysis

4% Hosting traffic

3% Hosting assist

3% Media Platform

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• Adding $3.6 million EBITDA and $1.2 million NPAT in FY18

EPS accretive • Increasing EPS by approximately 6 cents

• $3m+ pre-tax synergies, with $2.9m immediately recognisable

• Further top line increase expected with a reinvigorated focus on sales and account management

Depreciation and amortisation • Includes estimated $0.2 million in customer contract value amortisation

• Expected to drop to $1 million in FY19, increasing NPAT by $0.6 million as assets reach end of life

• Asset replacement not required due to move to public cloud

• Annual capex assumed to be $0.6m

Hostworks projected $1.2M NPAT contribution in FY18

Full Year2018

$’000

Revenue 21,824

EBITDA 3,621

Depn and Amort (1,623)

EBIT 1,998

Interest (294)

PBT 1,704

Tax (511)

NPAT 1,193

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1. Gartner (2006). 2. Telsyte.

As enterprises increase usage and expenditure on public cloud

services and infrastructure

Cloud-based Infrastructure services (IaaS) growing in

excess of 30% p.a. 1 globally

IT expenditure rapidly shifting globally towards cloud-based

services at 17% p.a. 1

Rapidly Growing Market

$1.049 Billion 30% Growth p.a

Shift from Tin-to-CloudAustralian IaaS Market by 2020 2

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Current Market Position

Cloud-enabled Managed Hosting Services Market

Cloud Service Offering

• Compute, Network and Storage infrastructure • Cloud management software • Flex+ Cloud orchestration platform to seamlessy combine public and private clouds

Excellent technical capability and experience in managed

hosting services

Flex+ Cloud orchestration platform developed, with further growth in market

share expected from ongoing investment into development

and marketing activities

Opportunity for exploitation of existing market opportunity

Opportunity for geographic expansion to capture

market share

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Combined CompanyF

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Inabox (pre-acquisition) Combined Group

Company Established 2003; Corporate office located in Sydney, 14 locations Australia wide

Unchanged after merging IAB and HW offices in Sydney and Adelaide

Business Managed IT, Cloud and Communications to SME and Corporate

Extended Cloud Services offering

Customers SME, Large SME and Corporate Additional 60+ blue-chip customers

Staff 220+ full-time employees 300 staff (1st full year)

Data Centre/POP’s Sydney, Melbourne, Brisbane and Perth Additional Data Centre in Adelaide

NOC Predominantly business hours Consolidated 24/7 National Operations Centre

Financials FY16 Revenue $88m (70% recurring)

FY16 EBITDA $5.5m

Group Revenue approx. $110m (Year 1)

Combined Entity SnapshotF

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Cross selling opportunities between existing wholesale/corporate customers and HWs blue chip customer base

Extends cloud-based capabilities of Inabox’s current offering

Combined offering – products & services

IAB Current Offering

Telecommunications

Managed IT

SME Cloud Solutions

Hostworks cloud infrastructure & platform

Managed Hybrid Hosting

Cloud Migration Services Capability

Digital transformation services capability

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Market Landscape

Public Cloud Hosting &

Infrastructure

Private Cloud Hosting &

Infrastructure Managed IT Telecommunications

Both Wholesale and Retail Sales

Channels

Inabox + Hostworks

MNF Group

BigAir/Superloop

Over The Wire

BrennanIT

Macquarie Telecom

AWS

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Immediate Savings

$2.9m $0.3m

$0.3m

Within 12 months

12-24 months

Total synergies of $3.5m with $2.9m available immediately

Hostworks: Over $3m pre tax Annual SavingF

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1. FY18 Forecast

Combined Group Revenue DistributionRevenue by Channel 1

50% Direct43% Indirect7% Enablement

86% Recurring

% of Recurring Revenue 1

14% Non-Recurring

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Hostworks will operate as a standalone business and Brand, and will form part of Inabox’s Direct Channel offering

Growth Strategy

Sales • Expand sales capability into VIC,

QLD and WA using IAB relationships and expert HW sales teams

• Two-way cross sell opportunities

• Cloud services to existing Direct Channel Customers

• Managed IT into HW customer base

• Launch HW product into Indirect channel

• Refocus sales towards high margin managed cloud hosting and away from media content delivery

Product • Productise an easy to sell SME product

for the Indirect Channel

• Leverage Flex+ product and migrate existing customers onto platform

Further Synergies • Merge Australian based support

teams into one (~12 months)

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TransactionDetails and Summary

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$7m purchase price representing < 2x post synergy FY18 EBITDA

Hostworks Transaction Funding

CBA $2m

Working CapCBA $1m

Vendor $2m

CBA short term funding$3m

$3m

$3m CBA short term funding

$2m vendor funding

• Issued by BAI Communications Pty Ltd

• Repayable over 12 months, commencing August 2017

CBA corporate debt facility with 3 year term commencing 1 Feb 2017

• $2m contributes to purchase price, $1m used for working capitalF

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Acquisition track record

Inabox successfully acquired Anittel in January 2015

$1M re-invested into sales capability

Transformed a loss making company to more than $2M EBITDA in first full year of Inabox ownership

Full integration into Inabox business achieved across culture, systems, operations and management

$3M of synergies realised in line with management’s forecasts

Cross-sell opportunities realised, with Anittel’s newly formed telco business expected to exceed $2M revenue in FY17

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EPS accretive, increasing EPS by approximately 6 cents (first full year)

Purchased for less than 2x post-synergy multiple on FY18 EBITDA

Grows IAB group revenues to over $100m, with 300 staff (first full year)

Fast tracks IAB cloud strategy, positioning for a large and rapidly growing market

Bringing revenues for which over 90% are recurring to strengthen the revenue model

by increasing combined recurring revenues to 86%

Two way cross-sell opportunities

Merges IAB’s distribution capability with the Hostworks managed cloud platform offering

Leverages IAB’s strong track record of successful acquisitions

Hostworks fits firmly within Inabox’s vision of being the leading managed IT, Cloud and Communications provider to SME’s and corporates in Australia

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Investor Presentation - ASX2017/02/03 · Investor Presentation Acquisition of Hostworks Group Pty...

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