Mitel Networks. Canaccord Genuity 34 th Annual Growth Conference. August 14, 2014

Transcription

1 Mitel Networks Canaccord Genuity 34 th Annual Growth Conference August 14, 2014

2 SAFE HARBOR STATEMENT Forward Looking Statements Some of the statements in this presentation are forward-looking statements (or forward-looking information) within the meaning of applicable U.S. and Canadian securities laws. These include statements using the words target, outlook, may, will, should, could, estimate, continue, expect, intend, plan, predict, potential, project and anticipate, and similar statements which do not describe the present or provide information about the past. There is no guarantee that the expected events or expected results will actually occur. Such statements reflect the current views of management of Mitel and are subject to a number of risks and uncertainties. These statements are based on many assumptions and factors, including general economic and market conditions, industry conditions, operational and other factors. Any changes in these assumptions or other factors could cause actual results to differ materially from current expectations. All forward-looking statements attributable to Mitel, or persons acting on its behalf, and are expressly qualified in their entirety by the cautionary statements set forth in this paragraph. Undue reliance should not be placed on such statements. In addition, material risks that could cause results of operations to differ include the Mitel s ability to achieve or sustain profitability in the future since its acquisition of Aastra; fluctuations in the quarterly and annual revenues and operating results; fluctuations in foreign exchange rates; current and ongoing global economic instability political unrest and related sanctions, particularly in connection with the Ukraine and the Middle East; intense competition; reliance on channel partners for a significant component of sales; dependence upon a small number of outside contract manufacturers to manufacture products; the ability to successfully integrate the acquisition of Aastra and realize certain synergies; and, our ability to implement and achieve our business strategies successfully. Additional risks are described under the heading Risk Factors in Mitel s Transition Report on Form 10-K for the eight month period ended December 31, 2013, filed on with the Securities and Exchange Commission on March 31, Forward-looking statements speak only as of the date they are made. Except as required by law, we do not have any intention or obligation to update or to publicly announce the results of any revisions to any of the forward-looking statements to reflect actual results, future events or developments, changes in assumptions or changes in other factors affecting the forward-looking statements. Non-GAAP Financial Measurements This presentation includes references to non-gaap financial measures including Adjusted EBITDA, non-gaap income and non-gaap operating expenses. Non-GAAP financial measures do not have any standardized meaning and are therefore unlikely to be comparable to similar measures presented by other companies. We use these non-gaap financial measures to assist management and investors in understanding our past financial performance and prospects for the future, including changes in our operating results, trends and marketplace performance, exclusive of unusual events or factors which do not directly affect what we consider to be our core operating performance. Non- GAAP measures are among the primary indicators management uses as a basis for our planning and forecasting of future periods. Investors are cautioned that non-gaap financial measures should not be relied upon as a substitute for financial measures prepared in accordance with generally accepted accounting principles. Please see the reconciliation of non-gaap financial measures to the most directly comparable U.S. GAAP measure included in this presentation and, if not contained in this presentation, contained in Mitel s Reports on Form 8-K which have been filed with the SEC on March 27, 2014, April 2, 2014, May 8, 2014 and August 7,

3 What we do and who we aspire to be We deliver solutions that enable our customers to communicate and collaborate, and to conduct business anywhere, over any medium with the device of their choice. To be the premier business communications and collaboration company in our industry Delivering superior financial results Create loyal customers and partners Be place where people want to work 3

4 Mitel is on the Move 4

5 Mitel Today

6 Global Market Share Leadership Q World #4 Western Europe #1 Germany #2 UK #2 France #2 Netherlands #1 Sweden #1 Switzerland #1 Belgium #1 Europe, Middle East and Africa #1 North America #3 US #4 Canada #2 Source: MZA PBX/IP PBX Market, World Quarterly Edition, Q1 2014,for Total Market, June

7 Continued Strong Cloud Growth Q2 2014

8 Mitel Gartner s Leaders Quadrant for UC July 2013 July 2014 Mitel Mitel 8

9 Outstanding Contact Center Growth Advancement in Gartner Magic Quadrant June 2013 May 2014 Mitel Mitel 9

10 Mitel Upgraded by Standard and Poor s #mitelonthemove Standard and Poor's Upgrades Mitel Networks Ratings on Early Success of Aastra Integration The positive outlook reflects our expectation that Mitel will continue to successfully integrate Aastra within the coming year, which should drive a sustainable improvement in earnings and strengthen the company's market position. Standard and Poor s June 11, 2014

11 Industry Analyst Assessments Mitel Positioned as a Leader in Gartner s Magic Quadrant for Unified Communications Mitel advanced into the Leaders quadrant with both a good UC vision and market execution. Its acquisition of Aastra expands its market, giving it access to new markets and client bases The new Mitel now has significantly more presence and visibility on a global scale Organizations looking for a fully integrated UC approach at an attractive price, those looking for flexible cloud options and those evaluating telephony communications functionality to integrate with Microsoft Lync should evaluate Mitel s MiVoice and MiCollab UC solutions AUGUST 2014 Commenting on the Gartner UC Magic Quadrant Mitel will use MiCollab as the common UC user experience interface across all of their current MiVoice Business and acquired platforms including MiVoice MX-One, A400, A5000, and Clearspan This seems to me like a brilliant move by Mitel to provide the best user experiences to all of their customers at the fastest pace and with the least disruption to the customers existing investments. AUGUST 2014 The UC system vendors today that are increasing their market presence are Cisco, Microsoft, and Mitel, according to a recent Wainhouse Research study. Mitel has successfully been ahead of several megatrends within the industry, including hardware to software, virtualization, mobility, and the growing demand for services-based solutions. The recent acquisition of Aastra expanded the company's global position. JUNE 2014

12 What drives our market Cloud: Virtualization: Public Lowering and barriers private to entry Cloud: Public and private Unified Communications: Increased collaboration Mobility: Seamless connectivity Consumerization of Enterprise IT: Leverage consumer devices Transitioning from TDM PBX to IP PBX to Cloud Decoupling of software from proprietary HW infrastructure Data Center virtualization/cloud offerings Voice is a (mission critical) application Proliferation of enterprise mobility Emergence of public & private cloud Growth and commoditization of UC applications market Bring Your Own Device (BYOD) is proliferating Contact Center are decoupling from the PBX and cloud solutions are growing 12

13 The landscape IP-PBX UCC Contact Center Mobile Players ENTERPRISE PLAYERS CosmoCom SOFTWARE PROVIDERS MiContact Center Video Players more than 100+ in the US alone INTERNET PLAYERS

14 Market Segment Served & Customer Needs Small Business (1-30 employees): Mid Market ( employees): Large Enterprise (1000+ employees): Extra-Large Enterprise (10,000+ employees): Less sophisticated process integration but Highly mobile centric Ideal consumers of public cloud solutions displacing small end customer premise platform Often have more sophisticated business process integrations Interested in Private Cloud solutions but open to Public cloud offers with private cloud attributes (e.g. multiinstance) Strong interest in PBX to Cloud-based PBX managed migration (low risk) More sophisticated business process integration and significant capital investment Primarily interested in Private Cloud migration (e.g. multiinstance) Federation between On-premises and Cloud solutions are important Subset of Large Enterprise but may be more open to IP Centrex deployments particularly in the US. Interest in Public Cloud Interest in Private Cloud 14

15 Mitel s Integrated Portfolio: Scalable, Competitive, Strategic APPLICATIONS End Points Enterprise Mid Market MiVoice Enterprise MiVoice Business Contact Centers MiCloud Enterprise MiCloud Business SMB MiVoice Office MiCloud Office Platforms Cloud

16 FRAMEWORKS Enablers Industry IT Frameworks IN-OFFICE EXPERIENCE, ANYWHERE, ON ANY DEVICE

17 Cloud Customers

18 Fortune 500 Customers

19 Verticals Education Financial Services Health Care Hospitality Government Manufacturing Professional Services Media & Entertainment Retail

20 Financial Review

21 June Quarter Business Highlights Recurring cloud seat growth of 98% y-o-y brings installed recurring seat count to 196,000 Total cloud seats installed grew 75% y-o-y to 754,000 Gartner recognizes Mitel as a Leader in the 2014 Magic Quadrant for Unified Communications and as a Challenger in Contact Center Infrastructure MZA research concludes that Mitel is the #1 market share leader in Western Europe and EMEA Strengthened Capital Structure Strong Cash position of $134.2 million at June 30, 2014 Voluntary pre-payment of $25 million made against the company s term loan $50 million in total paid down since May

22 June Quarter Financial Highlights (Pro-forma) $M Q Revenue Margin Non-GAAP OPEX Adjusted EBITDA $ % $122.0/ 42.3% (1) $38.8/ 13.4% A quarterly record Operational discipline A culture focused on cost controls Tracking toward Target Model (1) consists of R&D and SG&A less stock compensation and amortization of acquired intangibles.

23 1H 2014 Financial Performance Update Margins Net Leverage Total Leverage Revenue (1)(2) Gross Profit and Margin (1)(2) Adjusted EBITDA and Margin (1) 0.1% Decrease $566.5 $566.1 $295.8 $71.6 $277.0 $ % 12.6% 48.9% 52.3% 1H H H H H H 2014 Adjusted EBITDA CapEx (1) Debt and Leverage (3) Annual Run-Rate Synergy (4) $55.5 $64.1 $287.5 $317.0 $50.0 $ x 1.9x 2.5x 1.3x 1H H H H 2014 Original Projection Updated Projection (1) 1H 2013 is Pro Forma for Mitel and Aastra. (2) Both periods include a $6.9 million non-cash reduction related to acquisition accounting. (3) 1H 2013 represents Mitel standalone, July 31, (4) Expected to be achieved by June 30,

24 Consolidated Historical Financial Overview (1) (USD $ millions) Annual Revenue Mitel Aastra Combined Company Synergies Gross Profit and Margins $1,191.5 $1,158.4 $1,160.7 (2) $583.7 $580.6 $601.7 (2) CY 2012 CY 2013 LTM 6/30/2014 Adjusted EBITDA and Margins CY 2012 CY 2013 LTM 6/30/2014 Adjusted EBITDA Less CapEx $152.7 $ $ $ $ $ CY 2012 CY 2013 LTM 6/30/2014 CY 2012 CY 2013 LTM 6/30/2014 (1) CAD to USD exchange rate at the average exchange rate over each respective period. (2) Excludes $5.8 million non-cash adjustment for acquisition accounting. 24

25 Synergy Update Synergies Costs To Realize $ $41.1 $50.0 $49.6 Original Updated Projection Projection Original Updated Projection Projection Original Updated Projection Projection ($3.0) ($5.0) $12.5 $20.0 ($32.0) ($24.0) ($22.5) Original Updated Projection Projection Original Updated Projection Projection Original Updated Projection Projection ($62.5) Initial synergy target of $50 million annualized synergies Original synergies forecast of $10 million - $12 million in 2014 Based on integration activities to date, Mitel expects to achieve ~$20 million of synergies in 2014 Management increased synergy expectations from the previously communicated $50 million to current view of $75 million Key drivers for the increased synergy forecast include: - Upside in supply chain synergies from contract manufacturing rationalization, global warehouse consolidation and freight cost reductions - Upside in R&D synergies following extensive portfolio analysis - Additional headcount reductions globally COGS SG&A R&D One-Time Cash CapEx 25

26 Strategic Model Challenges Revenue Mix Dynamics Legacy Services (Maintenance / CLEC) Legacy Hardware US Direct Move to MRR Cloud Contact Center Software Software Assurance Advanced Services

27 Target Model Target Model 1 Gross Margin 54-55% R&D 9-10% SG&A % Total Operating Expense % Adjusted EBITDA 16-18% Effective Tax Rate 18-20% 1. Target model assumes integration and synergies complete 2. Excludes stock-based compensation, amortization of acquired intangibles, and special charges and restructuring costs

28 Mitel A Company Transformed & Positioned for Growth A Global Leader with the #1 Market Share Position in Western Europe Proven Management Track Record of M&A Integration Comprehensive & Focused Solution Portfolio Increased Synergy Targets From $50mn to $75mn $Billion Scale with True Global Footprint A Strong Balance Sheet Built on Strong Cash Generation 28

29 Mitel Networks Non-Deal Roadshow Toronto Cormark August 8, 2014