Xplore Technologies The World Expert in Rugged Tablets. February 2017

Transcription

1 Xplore Technologies The World Expert in Rugged Tablets February 2017

2 Disclaimer This Presentation includes forward-looking statements. All statements made in this Presentation that are not of a historical nature are forward-looking statements. Forward-looking statements reflect the Company s current expectations, estimates and predictions about future results and events. Such projections and statements are based upon assumptions about future events that are inherently uncertain and subjective. Although the Company believes that the expectations contained in these forward-looking statements are reasonable, it cannot give any assurance that these expectations will prove to be correct. Actual results may vary materially from those described in the forward-looking statements. The Company is under no duty to update any of the forward-looking statements after the date of this Presentation or to conform these statements to actual results. Nothing contained herein is intended to be, nor should be relied upon as, a promise or representation as to future performance of the Company. 2

3 Why Xplore Highly Differentiated Technology Large and Growing End Markets Global Leading Share Pivot to Profitability Sound Financial Fundamentals Purpose built rugged devices for difficult environments Proven ROI and low TCO Increasingly diverse end markets Rising demand for mobility #2 global market share Expanding F500 / G2000 customer base Reduced opex ~$5M YoY Focus on profitability, profit leverage, cash flow Solid revenue base Gross Margin 28-30% Book / Share $2.86 3

4 F3Q17: Profitable Profitability Confirmed Profitable new operating model $24.5M revenue 3 rd best quarter in Xplore history 27.1% gross margin Including large order fulfillment GAAP net income $219k, $.02 EPS $5.7M in positive cash flow Backlog of $5.6M entering F4Q Proven lower opex: down $5M YoY 4

5 F3Q17: and Ramping Increasing Demand Rapidly ramping demand Largest sales pipeline in company history: Expanding list of Fortune 500 and Global 2000 customers and prospects Number of customer refresh opportunities in process New VP International Sales, new sales team members Strengthened Board and Governance 2 new board members, enhanced corporate governance policies 5

6 Executing on Growth Opportunities Growing International Sales Multi-million per quarter upside in Europe Further develop and expand Latin America Rebuild distributor channel in multiple regions Addressing Supply Chain Constraints Working with ODM and adding second sources where applicable Move from 90-day to 120-day rolling forecasts Increased unit orders with ODM partners Working to increase manufacturing capacity at ODMs Selling into New and Underpenetrated Markets from Motion acquisition Multiple new end markets Larger total addressable market Increasing penetration at existing customers Additional divisions currently using consumer, business or laptop platforms 6

7 Growth Driver: XSLATE D10 Xplore s Newest Fully-Featured, Fully-Rugged, and Lightweight Android Tablet Android Lollipop OS 5.1 MIL-STD-810G Certified with 5 Drop Rating IP65 Rated for Dust and Liquids Intel Bay Trail Quad Core runs complex applications at low power output Full Shift Battery Life Up to 8 Hours, 20 Hour Hot Swappable External Battery Brilliant Outdoor, Wide-Viewable Display for Field Applications Robust Connectivity: Two USB 3.0 Ports ac Bluetooth GPS RJ-45 Micro HDMI, MicroSD Integrated bar code, HDMI and NFC Full complement of docks & accessories Android, Google, Google Play and other marks are trademarks of Google Inc. 7

8 Growth Driver: XSLATE R12 Now Shipping MIL-STD-810G, IP54, C1D2 certified rugged 2-in-1 mobility Intel Core -Series processors, large 12.5 Gorilla Glass 800 Nit screen Robust Connectivity plus pass-thru WWAN, WLAN, GPS Antenna Fingerprint scanner, removable SSD, optional Smart Card/CAC reader Hot swappable battery provides over 9 hours of battery life Full complement of docks & accessories Android, Google, Google Play and other marks are trademarks of Google Inc. 8

9 Driving Increased Profitability

10 Diverse Solutions Ultra Rugged Fully Rugged Semi Rugged Accessories Customer Engineered Features Increasing mobility plus growing recognition of rugged ROI driving multi-billion market opportunity 10

11 Global Leading Customer Base Energy / Oil & Gas Field Service / Utilities Distribution / Manufacturing Military/Federal Pharmaceutical / Healthcare Public Safety / Government Telecommunication Transportation Retail / Hospitality 11

12 Large Addressable Markets Rugged Tablet Rugged Laptop Non-Rugged Market Size $600M $900M Multi-Billion Market Growth ~5% annual Low single digits Variable Xplore Opportunity Gain further share as #2 global leader, bespoke capability Mobility driving shift away from laptop format Convert non-rugged installations and paper processes Competitive Landscape Drive share gains through growing sales pipeline with existing and new customers Convert rugged laptop market as customers demand greater mobility and convertible products High ROI from mobility investments; better performance and reliability vs consumer products, cases 12

13 History of Revenue Growth $120.0 Strong History of Revenue Growth 28% CAGR E $100.0 $100.5 $80.0 Motion asset acquisition one-time catch up orders** $78-82 $60.0 $42.6 $40.0 $27.5 $30.5 $35.6 $20.0 $17.8 $0.0 FY11 FY12 FY13 FY14 FY15 FY16 FY17E* *FY17E reflects midpoint of guidance; Outlook as of February 2, 2017; Xplore fiscal year is April 1 March 30 ** Reflects management estimate of one-time Motion catch-up orders at 20-30% of FY16 sales 13

14 Revenue Drivers Revenue Ramping Demand in Expanded End Markets Increasing adoption by Fortune 500 / Global 2000 customers Expand footprint in under-penetrated verticals Enter new end-markets for rugged tablet applications Take share from adjacent rugged and non-rugged products Grow International Channels Rebuilding European sales channel, new sales team Expand Latin American sales Increase non-us sales as percentage of total revenue Leverage Best-in-Class Product Lines Exploit the errors and weaknesses of our competition Engineered solutions align closely to customer needs 14

15 Profit Growth Drivers Profit Diligent focus on product margin Premium products: 28-30% gross margin Global ODM and supplier negotiations Strong pricing and currency policies Investing in operating efficiency OpEx reductions reduced costs $5 million in 2017 (-17%) Enterprise ERP implementation to increase access to data and profit driven pricing models Capture additional operational synergies through product line efficiencies and ODM services Build the brand globally through channel partners to reduce cost of sales 15

16 Operating Leverage Drives Profit Growth ($ millions) FY2015 FY2016 FY2017 Outlook Target Model Revenue $42.6 $100.5 $78 - $82 $120+ Gross Margin 33.6% 31.2% 28% - 30% 28% - 30% OpEx $13.0 $30.3 $25 - $27 ~20% FY2016 Impacted by: Acquisition of Motion assets and related one-time revenue (20-30%) Margin benefit of pent-up Motion demand FY2017 outlook includes: Impact of short-term global rugged slowdown in early 2016 Est. $5 million net YoY operating expense reductions Late-year supply chain disruption (est $4-6 million top-line impact) Outlook provided February 2, 2017 and is not being updated or confirmed in this presentation. Reconciliation in Appendix. 16

17 Positioned for Long-Term Growth, Profitability Specialty Product Focus Highly differentiated products for demanding conditions Higher gross margin Sound Industry Dynamics Growing $600M rugged tablet, $900M rugged laptop opportunity Multi-billion non-computerized opportunity with high ROI Growing Revenue Taking competitor share through better service, customization Expanded sales channel and distribution Increasing Profitability Substantial opex reductions drive improved profitability in FY2017 Incremental revenue has high net income contribution 17

18 Thank You 18

19 Non-GAAP Reconciliation Fiscal 2017 FY st Qtr 2nd Qtr 3rd Qtr 4th Qtr YTD Revenue $ 16,473 $ 20,007 $ 24,499 $ - $ 60,979 Cost of revenue 11,609 14,31 17,784-43,764 Gross profit 4,864 5,636 6,715-17,215 Expenses Sales, marketing and support 3,435 2,896 3,153-9,484 Product research, development & engineering 953 1,317 1,303-3,573 General administrative 2,039 1,868 1,816-5,723 Total expenses 6,427 6,081 6,272-18,780 Profit/(loss) from operations (1,563) (445) (1,565) Other expenses Interest expense (8) (69) (79) - (156) Other income/expenses (96) (22) (96) - (214) (104) (91) (175) - (370) Income/(loss) before taxes (1,667) (536) (1,935) Income taxes (80) - (49) - (129) Net income $ (1,747) $ (536) $ 219 $ - $ (2,064) Depreciation & amortization ,168 Interest expense Income taxes EBITDA (1,311) (11) (611) - Non-cash compensation Adjusted EBITDA $ (1,136) $ 116 $ 822 $ - $ (198) 19

20 Non-GAAP Reconciliation Fiscal 2016 FY st Qtr 2nd Qtr 3rd Qtr 4th Qtr YTD Revenue 24,043 28,853 27,023 20, ,530 Cost of revenue 15,893 20,744 18,181 14,365 69,183 Gross profit 8,150 8,109 8,842 6,246 31,347 Expenses Sales, marketing and support 3,620 3,642 3,925 3,909 15,096 Product research, development & engineering 1,830 1,577 1,129 1,235 5,771 General administrative 2,331 2,487 2,521 2,088 9,427 Total expenses 7,781 7,706 7,575 7,232 30,294 Profit/(loss) from operations ,267 (986) 1,053 Other expenses Interest expense (6) (52) - - (58) Cost of integration (670) (122) (95) (26) (913) Other income/expenses 63 (131) (317) (65) (450) (613) (305) (412) (91) (1,421) Income/(loss) before taxes (244) (1,077) (368) Income taxes - - (69) 75 6 Net income (244) (1,002) (362) Depreciation & amortization ,730 Interets expense Income taxes (75) (6) EBITDA ,353 (660) 1,420 Non-cash compensation ,156 Cost of integration Adjusted EBITDA 1,397 1,221 1,983 (112) 4,489 20

21 Non-GAAP Reconciliation Fiscal 2015 FY st Qtr 2nd Qtr 3rd Qtr 4th Qtr YTD Revenue 8,267 7,522 16,443 10,407 42,639 Cost of revenue 5,203 5,255 10,569 7,293 28,320 Gross profit 3,064 2,267 5,874 3,114 14,319 Expenses Sales, marketing and support 1,598 1,714 1,630 1,410 6,352 Product research, development & engineering ,537 General administrative 1, ,139 4,103 Total expenses 3,596 3,430 3,425 3,541 13,992 Profit/(loss) from operations (532) (1,163) 2,449 (427) 327 Other expenses Interest expense (1) (2) - (3) Cost of integration - Other income/expenses (19) (3) (7) (7) (36) (19) (4) (9) (7) (39) Income/(loss) before taxes (551) (1,167) 2,440 (434) 288 Income taxes - - (39) - (39) Net income (551) (1,167) 2,401 (434) 249 Depreciation & amortization Interets expense Income taxes EBITDA (379) (902) 2,695 (204) 1,210 Non-cash compensation Cost of integration Adjusted EBITDA (220) (736) 2, ,894 21

22 Key Financial Ratios FY st Qtr 2nd Qtr 3rd Qtr 4th Qtr YTD Gross margin 29.5% 28.2% 27.4% 28.2% Operating margin -9.5% -2.2% 1.8% -2.6% Periodic revenue % N/A N/A NA 100.0% Quarter over Quarter Revenue Change % -20.1% 21.5% 22.5% FY st Qtr 2nd Qtr 3rd Qtr 4th Qtr YTD Gross margin 33.9% 28.1% 32.7% 30.3% 31.2% Operating margin 1.5% 1.4% 4.7% -4.8% 1.0% Periodic revenue % 23.9% 28.7% 26.9% 20.5% 100.0% Quarter over Quarter Revenue Change % 131.0% 20.0% -6.3% -23.7% FY st Qtr 2nd Qtr 3rd Qtr 4th Qtr YTD Gross margin 37.1% 30.1% 35.7% 29.9% 33.6% Operating margin -6.4% -15.5% 14.9% -4.1% 0.8% Periodic revenue % 19.4% 17.6% 38.6% 24.4% 100.0% Quarter over Quarter Revenue Change % -0.9% -9.0% 118.6% -36.7% 22