Investor Presentation. November 29, 2018

Transcription

1 Investor Presentation November 29, 2018

2 Forward-Looking Statements We may make forward-looking statements in this presentation within the meaning of the Securities Litigation Reform Act of These forward-looking statements relate to expectations or forecasts for future events, including without limitation our earnings, revenues, Adjusted EBITDA, cash flow generation, industry, taxes, expenses or other future financial or business performance or strategies, results of operations or financial condition, capital expenditures, operating expense savings and our ability to execute our opex savings plan, the maturities of our outstanding indebtedness, and our ability to deleverage in the future. These statements may be preceded by, followed by or include the words may, might, will, will likely result, should, estimate, plan, project, forecast, intend, expect, anticipate, believe, seek, continue, target or similar expressions. These forward-looking statements are based on information available to us as of the date they were made, and should not be relied upon as representing our views as of any subsequent date. These forward-looking statements are subject to a number of risks and uncertainties, including without limitation those risks and uncertainties described in our most recent annual report on Form 10-K and subsequently filed reports on Form 10-Q. As a result, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements. We do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. 2

3 Management Overview

4 Management Jeff Leddy Executive Chairman Select prior work experience: Verizon Telematics, SkyTerra Communications Joined Global Eagle: February 2013 Per Norén President Select prior work experience: Boeing, Carmen Systems Joined Global Eagle: March 2017 Josh Marks Chief Executive Officer Select prior work experience: masflight, ejet Aviation, MAXjet Airways Joined Global Eagle: August 2015 Paul Rainey Chief Financial Officer Select prior work experience: Harris Caprock, General Electric Joined Global Eagle: April

5 Company Overview

6 Solutions that connect, entertain and inform passengers and remote workers, enriching time with fast internet, live television, games and applications Satellite-based connectivity Movie & TV licensing and delivery Content processing and programming Digital media applications Operational and commercial analytics 6 Aviation Airliners Private Jets Government Land Enterprise solutions Government & NGO Military solutions Maritime Cruise and ferry Merchant shipping Yachts

7 Company Background Services and markets developed through acquisitions and organic growth Combination of two leaders in in-flight connectivity and content in 2013 Row 44 and AIA (Advanced Inflight Alliance) Developed airline capabilities then expanded to maritime and land through EMC acquisition Global footprint, with major facilities in USA, Canada, UK and India ~1,400 employees Connectivity 52% Enterprise & Government 18% Aviation 44% Asia & Middle East 29% Other 8% Segments Media & Content 48% Maritime 38% Connectivity Base Europe 21% Geographic Mix US & Canada 42% 7 Note: Charts reflect mix based on 2017 revenue results.

8 Global Reach Supporting global customers at local offices, teleports & data centers Office Locations Teleports Support Centers 8

9 Market Leadership Position Smartphone & tablet connectivity Portals and apps to engage end-users Seatback movies & IFE media services Analytics that inform loyalty & guest services Provider of satellite-based passenger connectivity for single-aisle airliners Independent distributor of global content to aviation industry Live television broadcaster to maritime and aviation markets Inflight games and seatback IFE interface design services 9

10 Key Investment Highlights 1 Diversified Business Bolstered by Broad Enterprise Customer Base Broad base of blue-chip customers in aviation, maritime and land connectivity & entertainment Balanced mix of revenue lines across geographies / end-markets and growth 2 Established Player Across Content and Connectivity Strong position in large, growing connectivity market Dominance in traditional IFE content market Growing penetration of addressable market 7 New and Invigorated Management Team Proven track record of success at other industry-leading companies Recent wins validate connected entertainment strategy and go-to-market model 3 End-to-End Connected Entertainment Solution Widely-adopted IFE connectivity platform combined with best-in-class curated content Combination of content & connectivity drives new opportunities for revenue and licensing 6 Sustainable Competitive Advantages Scale benefits of existing installed customer base across verticals and global regions Long-term content customer relationships Existing satellite and ground infrastructure 5 Improving Cash Flow Generation Focused on improving cash flow through organic revenue growth, a lower cost structure and a stable level of capex Industry is becoming less capital intensive with fewer funded deals 4 Market Opportunities Expansion of IFE beyond the seatback via smartphones and advertising Growth in installed base across 250,000 global maritime vessels 10

11 1 Diversified Business Mix Connectivity Media & Content Aviation Maritime Land CSP Content Distribution Digital Media Equipment Sales and Services Wi-Fi and TV Services Other Services (Cockpit avionics & analytics) Cruise / Ferry Yacht Commercial Shipping Oil / Gas Government / Enterprise United Nations / non-gov t orgs Brazil Cellular backhaul Content Licensing Content Services Technical Services Airline Distribution Content Licensing Maritime / Airline / Non-theatrical Distribution Advertising Games Apps % of Total Revenue 23% 21% 8% 30% 10% 8% 11 Note: Data is based on 2017 results and includes equipment revenue

12 1 Broad Customer Base Connectivity Connectivity Media & Content Media & Content End-to-end customer services Global satellites, teleports & network infrastructure Certified antennas and on-board systems Licensing & distribution (movies, TV & live events) Processing and editing Games, apps and digital advertising Aviation connectivity Aviation media & content Maritime & Land connectivity Maritime media & content 12 Note: Aviation connectivity includes trial agreements and MOU where IFC regs pending

13 2 Established & Growing $10 Billion Market Customer Markets Commercial airlines Business jets Cruise lines Private yachts Shipping, oil & gas Government & Land Addressable Market Install Base (3Q18) 2017E Market Size ($MM) Market Penetration Market CAGR 22,000 Aircraft 28,000 Aircraft 500 Large Vessels 13,000 Yachts ~130,000 Ships (1) ~1,000 NM 218 ~250 ~500 Defense, Humanitarian, & Enterprise ~ 1,000 Land Sites $1,800 $600 $750 $150 $3,100 $3,700 30% 50% 95% 70% 30% 20% 25% 12% 16% 12% 18% 7% Global Eagle Connectivity Capabilities Connectivity Wi-Fi Internet Redundant capacity Bandwidth optimization Cellular Voice / Data Global teleport network Operational Services Billing systems Operational data Analytics & reporting Equipment 13 Source: Company presentations and industry research. 1. Includes 121,000 commercial ships and 8,500 off-shore rigs

14 Existing Customers & Markets New 2 Content & Digital Media Market Opportunity Global Eagle has high share of core IFE content, but small share of the much larger $3 billion Airline Media Market with significant additional growth opportunities Market growth ~5% C.A.G.R. (1) Airline media market $3bn+ (supported by PwC analysis) Traditional IFE content market ~$0.5bn Movies, TV, Audio, Games & Apps Global Eagle currently has ~ 60% market share of traditional IFE market Example products and services: Live TV events Media sales & sponsorships Digital mobile apps Content marketing Data analytics e-commerce Affiliate marketing Creative Services Content anywhere door to door, including airports 14 Existing 1. 5% CAGR ( ) as per PwC analysis Products & Services New

15 3 Global End-to-End Connectivity Network Multi-vendor networks and proprietary technologies with end-to-end services Network Partnerships Proven Antenna Hardware Integrated Portal System Monetization Platform Efficient Coverage Global Support Services SATELLITES (60 TOTAL) Ku, Ka and C-band transponders Global capacity distribution Multiple satellite partners Two full-satellite leases for North America Television & Movies 15 TELEPORT FACILITIES (32 TOTAL) Las Vegas Australia Hawaii New Jersey Germany P E R F O R MA N C E E N H A N C I N G TECHNOLOGY GROUND NETWORK MPLS circuits (fiber interconnects) Traffic routing and prioritization (QoE Management) Proprietary & patented network management tools Gateways, firewalls and 30+ points of presence AVIATION SERVICES Antennas Cabin equipment Certification Third-party antenna integration Global field installation/support F U L L S A T E L L I T E L E A S E S Cockpit EFBs Repair services Billing & support Capacity planning Capacity management Portals & Software Turn-key platform Authentication Transactions Advertising/offers Video/TV Ops & Revenue Analytics Traffic analysis Bandwidth fairness Inventory reports Customer behavior Advertising metrics MARITIME & LAND SERVICES On-board revenue Cellular roaming

16 3 Hybrid Network Benefits We benefit from technical and economic disruption in the satellite market Global Eagle Satellite Network Primary Supplier Partnerships Primary aviation partner (Ku, Ku HTS) Primary maritime partner (Ku, Ku HTS) Ground network + aviation Ka Additional Suppliers Leased global capacity (transponders and 2 full satellites) Significant disruption ongoing in the satellite space Technology Change new HTS (high-throughput) satellites launching, now testing LEO (low earth orbit) satellites Economics significant satellite capacity increases driving bandwidth price deflation which we share with customers Scale benefits Our reach across verticals, global regions and opreators enable us to benefit from market dynamics We are technology agnostic We optimize on price and performance Our network has redundant satellite coverage We manage solutions for our customers, driving supply chain efficiencies and deploying the latest technology from each partner 16

17 3 New Network Capacity Sources (2021+) Ample access to future capacity with new technologies on the horizon 5G Unlicensed spectrum 17 Source: Company presentations

18 4 Exponential Data Growth Current-generation mobility networks are not optimized for new drivers of data consumption Trillion GB 5x growth in traffic by 2020 Virtual reality Augmented reality Video presence Interactive gaming Cloud synchronization Hosted applications Trillion GB 18 Source: IDC

19 4 Connected Entertainment Combination of content & connectivity drives new opportunities for revenue and licensing Enhancing and personalizing our Enhancing customers and end-user personalizing experience our customers end-user experience Expand media scope: Expand media scope: Cross-sell air, sea and land Cross-sell air, sea and land Before, during and after journeys Before, during and after journeys Targeted advertising based on demographics Targeted advertising and preferences based on demographics and preferences Store content on vessel to reduce latency Store content & increase on vessel efficiency to reduce latency & increase efficiency 19

20 4 Gateway to Customer Engagement & Revenue Branded portals integrate media, TV, Movies, games and ads 20

21 5 Improving Cash Flow Generation Financial Priorities Increasing Organic Revenue Growth Lower Cost Structure Stable Capital Expenditures Focused on improving cash flow through organic revenue growth, a lower cost structure and a stable level of capital expenditures. Healthy organic revenue growth Low maintenance capex Improved Cash Flow Expect to reduce operating expenses by 10-15% annual run rate by YE 2018 Expect capex to be less than prior year Expect low cash taxes with NOLs 21

22 6 Sustainable Competitive Advantages Connectivity Media & Content Global Scale and Coverage Across Aviation, Maritime and Land Media and Connectivity Integration Installed Aircraft / Vessel Base Dominant Market Share Aircraft Certification, Installation and Service Management Capabilities Airline Diversification Infrastructure Long Standing Relationship with Studios Established Technology Platform & Portals International Content 22

23 Financial Overview

24 Focused Execution Healthy Core Profitable Growth Transform & Innovate Expand relationships with our customers Expect to reduce operating expenses by 10-15% annual run rate by YE 2018 Air France installations underway with new three-axis, high-speed aircraft antenna Unplanned 50+ aircraft installing Launched Airconnect Go IFE system ERP consolidation ongoing to improve financial reporting Transition to digital content supply chain Successful IFC test with Ka-band LEO satellite 24

25 Aviation Market Update Inflight Connectivity 3Q18 IFC revenue +15% versus prior year period 1,011 aircraft active at end of 3Q with ARPA of $120,000 Air France contract signed and installations of 113 A320 family now underway Launched free messaging and free movies on Southwest Our customers have hundreds of single-aisle aircraft on order with Airbus and Boeing Media & Content Second consecutive quarter of double digit revenue growth 2 key new customer wins, 2 expanded relationships 25

26 Maritime & Land Market Update Cruise & Ferry Major customers: revenue growth +17% vs 3Q vessels connected as of September 30, 2018 Across full fleet, +7% sequential growth in average revenue per vessel Other Maritime & Land Segments Well positioned to participate in US government and military modernization projects International growth driven by new sites and increased bandwidth Winding down cellular backhaul business, to complete during 1Q

27 Transformation Execution Cost reduction efforts starting to show results 3Q 2018 benefitted from ~$3 million of operating expense savings, or $12 million annualized benefit ERP consolidation driving process standardization during 4Q18, with 90% of financial data to be on one platform Additional cost-saving actions are in process in 4Q18, including office footprint consolidation, ERP consolidation, AP automation and digital content supply chain implementation 27

28 28 Thank you

29 Appendix

30 Equity Debt Capital Stack and Debt Maturity Schedule $85m 1L Revolver $500m Secured 1L Term Debt $150m 2L Notes $83m Conv. Convertible Preferred Notes Common Equity $531 $150 (Debt in $mm) 1, 2 $25 $381 $13 $22 $25 $25 $ First Lien Revolver First Lien Debt Second Lien Notes Convertible Notes L Revolver matures in 2022; $25m represents mandatory amortization payment on 1L Term Debt 2. Convertible Notes may be put to the Company at par value in February 2022, 2025 and 2030

31 About Non-GAAP Measures To supplement our consolidated financial statements, which are prepared and presented in accordance with accounting principles generally accepted in the United States, or GAAP, we present Adjusted EBITDA, which is a non-gaap financial measure, as a measure of our performance. The presentation of Adjusted EBITDA is not intended to be considered in isolation from, or as a substitute for, or superior to, net income (loss) or any other performance measures derived in accordance with GAAP or as an alternative to net cash provided by operating activities or any other measures of our cash flows or liquidity. Further, we note that Adjusted EBITDA as presented herein is defined and calculated differently than the Consolidated EBITDA definition in our senior secured credit agreement and in our second lien notes, which Consolidated EBITDA definition we use for financial-covenant-compliance purposes and as a measure of our liquidity. For a reconciliation of Adjusted EBITDA to its most comparable measure under GAAP, please see the table entitled Reconciliation of GAAP to Non-GAAP Measure at the end of this press release. Adjusted EBITDA is one of the primary measures used by our management and Board of Directors to understand and evaluate our financial performance and operating trends, including period to period comparisons, to prepare and approve our annual budget and to develop short and long term operational plans. Additionally, Adjusted EBITDA is one of the primary measures used by the Compensation Committee of our Board of Directors to establish the funding targets for (and subsequent funding of) our Annual Incentive Plan bonuses for our employees. We believe our presentation of Adjusted EBITDA is useful to investors both because it allows for greater transparency with respect to key metrics used by our management in their financial and operational decision-making and because our management frequently uses it in discussions with investors, commercial bankers, securities analysts and other users of our financial statements. We define Adjusted EBITDA as net income (loss) before (a) interest expense (income), (b) income tax expense (benefit) and (c) depreciation and amortization (including relating to equity-method investments) and (gain) loss on disposal and impairment of fixed assets, and we then further adjust that result to exclude (when applicable in the period) (1) change in fair value of financial instruments, (2) other (income) expense, including primarily, (gains) losses from investments and foreigncurrency-transaction (gains) losses, (3) goodwill impairment expense, (4) stock-based compensation expense, (5) strategic-transaction, integration and realignment expenses (as described below), (6) auditor and third-party professional fees and expenses related to our internal-control deficiencies (and the remediation thereof) and complications in our audit process relating to our control environment, (7) excess content expenses (as described below), (8) non-ordinary-course legal expenses (as described below), (9) losses on significant customer bankruptcies (as described below) and (10) restructuring expenses pursuant to our September 2014 integration plan. Management does not consider these items to be indicative of our core operating results. 31

32 About Non-GAAP Measures (continued) Excess content expenses includes the additional purchasing costs that we incurred in 2017 to procure movie content for our customers, notwithstanding that we could have procured equivalent content under our (preferential-pricing) output arrangements with major studios. We incurred these additional costs because we could not timely identify and measure our movie-content expenditures and procurement during the period due to weaknesses in our control environment. Losses on significant customer bankruptcies includes (1) our provision for bad debt associated with the bankruptcies of Air Berlin and Alitalia (two of our Media & Content customers) in 2017, together with (2) the costs (e.g., content acquisition fees) that we incurred to maintain service to those customers during their bankruptcy proceedings in order to preserve the customer relationship. Non-ordinary-course legal expenses includes third-party professional fees and expenses associated with the securities class-action lawsuits filed against us in 2017 and non-ordinary-course employment and intellectual-property-infringement disputes. Strategic-transaction, integration and realignment expenses includes (1) transaction- and procurement-related expenses and costs (including thirdparty professional fees) attributable to acquisition, financing, investment and other strategic-transaction activities (including for new product and proof-of-concept testing), (2) integration and realignment expenses and allowances, (3) employee-severance, -retention and -relocation expenses, (4) purchase-accounting adjustments for deferred revenue, costs and credits associated with companies and businesses that we have acquired through our M&A activities, (5) service-level-agreement penalties incurred during our Eagle-1 migration and setup in its new orbital slot in 2017, and (6) claims at companies or businesses that we acquired through our M&A activities for underlying liabilities that pre-dated our acquisition of those companies or businesses. In respect of clause (6) in this definition, we include (i.e., exclude from net income (loss)) any estimated loss contingencies and provisions for legal settlements relating to those liabilities. 32