Investor Presentation February 2016

Transcription

1 Investor Presentation February 2016 George Rossolatos, CEO Avante Logixx Inc. TSXV: XX OTC:ALXXF

2 FORWARD LOOKING INFORMATION This presentation may contain "forward-looking statements" within the meaning of applicable securities legislation. Generally, these forward-looking statements can be identified by the use of forward-looking terminology such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes" or variations of such words and phrases or state that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved". Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of Avante Logixx Inc. ( Avante ) to be materially different from those expressed or implied by such forward-looking statements. Although Avante has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. Avante does not undertake to update any forward-looking statements, except in accordance with applicable securities laws. DISCLAIMER This presentation is for information purposes only and is not intended to, and should not be construed to constitute, an offer to sell or the solicitation of an offer to buy, Avante s securities. This presentation and its contents should not be construed, under any circumstances, as investment, tax or legal advice. Any person viewing or accepting delivery of this presentation acknowledges the need to conduct their own thorough investigation into Avante s business and its activities before considering any investment in Avante s securities. Among other things, investors should review Avante s public filings which are available in Canada at 2

3 AVANTE LOGIXX OVERVIEW Avante Logixx Inc. ( Avante ), is a premium residential and commercial security provider and automation services integrator Headquartered in Toronto with 120 employees Investment Highlights Profitable business with strong organic growth and acquisition pipeline Attractive recurring revenue model with negative working capital dynamics Large and fragmented commercial and residential security market with significant synergy opportunities Strong balance sheet with minimal debt, high cash conversion & minimal CAPEX requirements Highly successful and knowledgeable management team with significant operational and acquisition execution experience 3

4 HISTORY & CORPORATE OVERVIEW Today Avante Security Inc. Avante Logixx Inc. Avante Logixx Inc. INTO Electronics Inc. LVS Inc. Founded by Manny Mounouchos (Current Director) Company vision focused on developing its own technology to distinguish itself from its competition Began as ultrapremium security only and expanded its offerings and services to a broader target market Lists on the TSX Venture Exchange via a reverse takeover under the ticker XX Focused on consolidating the fragmented higher end security, fire and lock space in residential and commercial applications in Canada and USA Revenue CAGR of ~13% from March 2008 to 2014 Becomes cash flow positive in June, 2012 Completes $5 million bought deal in March 2014 for the purpose of seeking acquisitions Acquired in August 2014 Founded in 1991, provides consulting in automation services and security solutions for the high-end residential market as well as the commercial and high-rise condo segments Acquired in April 2015 Founded in 1993, provides security systems to residential and commercial markets also includes home automation and locksmith services 4

5 SENIOR MANAGEMENT TEAM George Rossolatos CEO, Avante Logixx Inc. Rodney Wechsler President INTO-Electronics Inc. Yoram Dushek President, Avante / LVS Raghu Sampath CFO, Avante Logixx Inc. Jonathan Harris General Manager, ASI Joined Avante Logixx in mid 2010; Responsible for the strategic direction and execution of the business plan Revenue tripled since joining and turned from cash burn to profitability Former partner and co-founder of private equity fund TorQuest Partners Between , helped raise and invest two funds of $180MM and $550MM, respectively Overall IRR from exited investments was in excess of 60% Previously worked as an investment professional at Harrowston Inc., a publicly traded private equity fund, and in a management role with Ernst & Young LLP Recognized in 2007 as one of Canada s Top 40 under 40 CPA/CA (Ontario); MBA from the Kellogg School of Management (Marketing) at Northwestern University Involved in automation services and the security industry for over 20 years Founded INTO Electronics in 1991, initially focusing on automation and later branching out into security systems Educational background in Electrical Engineering from Technion, Cape Town, South Africa Graduated in electronic engineering from the Army Academy in Israel in 1975 and served in the Israeli Air Force till 1982 Worked for Hashmira, Israel s largest security company as Project Manager until 1990, handling several large projects in and outside of Israel Relocated to Canada in 1990 and worked for the National Guardian until 1993 when he founded LVS Since 1993, has grown LVS by focusing on security and home automation Experienced finance professional with over 15 years in diverse service industries, including staffing, oilfield services and public accounting Formerly, VP Finance at Randstad Canada, Corporate Controller at MB Group (Hungary and Oman), and Audit Senior at KPMG Oman M. Acct. from Virginia Tech; and CA designation from India Graduated in electronics from South Africa, specializing in television and wireless technology; qualified himself further in the fields of marketing and sales Worked as Sales Manager for an importer of high-quality CCTV systems, communications equipment and home electronics until he immigrated to Canada with his family Worked for Burtek Systems - one of the largest distributors of security products in Canada, as itstoronto Branch Mgr. 5

6 BOARD OF DIRECTORS In addition to George Rossolatos, the Board comprises of: Leland Verner Chair of the Board President of Illyria Inc., an independent firm since 1982 Previously Chairman & CEO of Invesprint Corporation and Chairman of Vincor International Inc. Graduate in Business from Ryerson University Manny Mounouchos Director Wesley De Shane Director & Chair of Audit Committee Bruce Bronfman, Director & Chair of Governance Committee Joseph Leeder Director & Chair of Compensation Committee Involved in the security industry for over 20 years Founded Avante in 1996 with a vision to apply technology to distinguish Avante from its competition Developed the first prototype SmartBoxx over 10 years ago Educational background in electronics from Ryerson A finance executive with experience in treasury, international tax planning, controllership, acquisitions and investor relations Previously, Chief Financial Officer of Invesprint Corporation, ZENON Environmental Inc., Canada Malting Co. Ltd. and Emco Limited, all Toronto Stock Exchange listed companies Graduate of the University of Western Ontario and a Chartered Accountant from the Ontario Institute of Chartered Accountants President of Mida Investments Ltd., a private investment and consulting company Previously, a consultant to Bayfield Realty Advisors; also was Co-Founder and Director of Rosedale Health Previously, a director / officer of several public companies such as Edper Group Limited, Brascan Limited, Hees International Bancorp Inc., Carena Developments Limited The current National Treasurer of the Canadian Associates of Ben-Gurion University of the Negev A finance executive, with extensive background in the areas of mergers, acquisitions, financings and financial consulting Previously, CEO and CFO of Envoy Capital Group Inc. and a Partner of the financial advisory services group at KPMG A commerce graduate of Concordia University and a Chartered Accountant from the Ontario Institute of Chartered Accountants 6

7 SHARE PRICE PERFORMANCE & SHAREHOLDERS Share Price Performance $0.50 $0.45 $0.40 B D $0.35 C $0.30 $0.25 E $0.20 $0.15 $0.10 $0.05 A $0.00 Jun-12 Nov-12 Mar-13 Jul-13 Nov-13 Mar-14 Jul-14 Nov-14 Apr-15 Aug-15 Dec-15 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1, Volume (000s) A B C D E Jun.2012 Turns cash flow positive Feb.2014 Completes $5mm private placement Jul/Aug.2014 Acquisition of INTO Electronics Inc. Mar/Apr.2015 Acquisition of LVS Inc. Oct 1/15 Feb 25/16 While the stock price went down by 10%, revenues grew 32% Shareholders Share Count Shares (M) Mkt Cap (M) Basic Shares Outstanding 81.4 $ % 19% 3% 4% 3% 4% 8% Manny Mounouchos George Rossolatos Yoram Dushek Leland Verner Rod Wechsler Other insiders All Other Shareholders Options Outstanding (vested) 1.0 Fully Diluted Shares Outstanding 82.4 % of Total Shareholder Shares (M) % of Total (incl. unvested) Manny Mounouchos % 18.00% George Rossolatos % 12.30% Yoram Dushek % 3.75% Leland Verner % 2.70% Rod Wechsler % 3.50% Other insiders % 3.25% Total insiders % 43.50% All Other Shareholders % 56.50% Fully Diluted Shares Outstanding % % 7

8 Quality of Service THE SECURITY LANDSCAPE Estimated market size of the security industry is USD 350 billion in the USA, which includes USD 282 billion of private sector spending. Of this, non-it security spending is estimated at USD 202 billion. Canadian market is about a tenth of the US market Industry is highly fragmented with many small operators with limited services, typically generating less than CAD 10 million in revenues annually Limited service offering Fully integrated service offering Mom & Pop operations Pricing 8

9 AVANTE GROUP - OPERATING UNITS Residential Commercial Description Executive protection, elite rapid alarm response, intelligent perimeter protection video analytics, enhanced security systems, etc. Description High-end security, home automation services integration; specialized skillset in residential security integration Description High-end security and automation services integration; specialized skillset in commercial and high rise security integration Total Revenue ~$8.7mm Recurring Revenue ~$3.8mm Total Revenue ~$2.8mm Recurring Revenue ~$0.9mm Total Revenue ~$2.8mm Recurring Revenue ~$0.9mm Offerings Offerings Offerings Security Camera Systems Patrol & Rapid Response Private Investigations Access Control Systems Intelligent Perimeter Protection Int l Security Travel Advisory Security Consulting Corporate Security Concierge Access Control Systems/24 Hour Monitoring Home Automation & Theatre Locksmith Services Camera Systems Security, Sprinkler & Life Safety Systems Intercom Systems Access Control Systems/24 Hour Monitoring Electronic Building Management Labour Tracking Systems Camera Systems Security, Sprinkler & Life Safety Systems Intercom Systems - Avante Logixx announced that it intends to consolidate LVS into the ASI brand. This is expected to happen by April 1, Avante Security, INTO Electronics and LVS are within close proximity of one another, with a 24/7 Control Centre which has the ability to monitor and respond to hundreds more new clients 9

10 AVANTE GROUP - LINES OF BUSINESS Through Avante Security, INTO Electronics and LVS, Avante Group provides: Patrol & Rapid Response Regular patrols at client sites 6-minute in-area response time Intercom Systems Capable of offering intercom systems for small and large customers, using a variety of technologies Monitoring Multi-channel technology-based video patrols 24/7, 365 Avante Control Centre and dispatch Dual monitoring (wired & wireless) International Security Travel Advisory Client location tracking Travel risk and threat reports Secured Transport For travel in unfamiliar / med- to high-risk countries Intelligent Perimeter Protection Intrusion Detection and Video Analytics Uses a combination of algorithms to study the environment the camera is focused on Personal Emergency Systems Two way voice emergency systems Pendant and Console activated systems Off-site monitoring in INTO s ULC listed Response Centre and 24/7 Concierge Centre Secure Transport Highly trained security focused drivers Counter-surveillance / first aid trained Labour Tracking Systems Time and attendance reporting for payroll; remote monitoring of on-site hardware while ensuring 24/7 System Data Integrity Electronic Building Management 24/7 monitoring and off-site management of all aspects of security Other Services: Bodyguard protection Private investigations Travel alerts 10

11 PRICE RANGE Installations With residential security installations, the Company caters to basic installation of $1K and goes up to $300K on high-end homes Commercial installations - range between $15K and $1 million Monitoring Digital monitoring - $28 per month (before tax) Wireless / GSM backup / SmartBoxx monitoring - $50 per month (before tax) Video Analytics uses software algorithms to detect potential burglars when they approach the property Video Analytics Monitoring ranges from $200 to $500 per month (before tax) Rapid Alarm Response ranges from $100 per month to $750 per month (before tax) 11

12 CUSTOMERS On the residential side, the growth (net of attrition) ranges between 5% and 10% In the commercial space, revenues tend to be lumpier than residential, but we target a growth rate of 5% to 10% Commercial Customers - Testimonials Recently DHL Express Canada Ltd. challenged me to find a product that could satisfy our unique IT requirements for our Host/LAN rooms. The challenge was to find a product that could monitor the rooms temperature levels and send out multiple alerts via and text once certain thresholds were crossed.. While researching this request I came across your companies Smartboxx technology. While other companies were able to just simply monitor the temperature and send out a single alert, yours was the only product to fully meet our requirements. I am happy to say that not only is our IT department impressed with the product, our engineering department is now looking at other ways to utilize this fantastic product. Simply put Avante Security and the Smartboxx were the only company and product that meet our challenge and for that we are thankful for your teams support in helping us. Mike Soberal Loss Prevention Manager We have had Avante Security protect our family for the past 10 years and their service is outstanding. Their staff is extremely accessible, polite and professional whenever we have had a need to contact them. They stand by their commitment and we rest easy a night knowing that Avante Security is monitoring our home and they are always here in mere minutes when we need them. Melissa Bridle Path On behalf of Blackberry Corporate Risk and Security, we would like to express our heartfelt thanks; you have been instrumental in our success and more importantly the safety of our personnel. In particular, thank you for your support over the past two months with the launch of the Blackberry 10. Your professionalism and dedication to duty have been a critical component to the success of our various events overseas. Patrick Morrrissey Blackberry s Director, Investigation and Protection Operations Residential Customers - Testimonials There is nothing that Avante Security cannot do, we have had special security requests that no other firm in Toronto could do. But after contacting Avante their experts went to great lengths to accommodate us and offer our family the ultimate level of protection Mike Rosedale I am writing to convey my appreciation for the prompt, courteous and professional service which you and your staff provide the ROM while assiting us in maintaining our security and CCTV systems Frank Petersen, Head of Security, Royal Ontario Museum Avante Security helped us beyond imagination when our house flooded during our African safari. They took control, managed the remediation and repair and we didn t have to cut our trip of a lifetime short. We will not forget the lengths the Avante team went to help us in our time of need. We will always be loyal customers of Avante! Eric Forest Hill 12

13 FINANCIAL SUMMARY Recurring revenue base with high margins Growth driven through new customer outreach, cross-selling and development of a corporate customer base Significant growth in recurring revenue Revenue run rate of ~$14.5 MM if INTO and LVS Inc. were to be annualized based on the results since acquisition Low asset base with minimal capex requirements Balance sheet has grown more robust without any incremental working capital requirements (negative working capital business) Debt-free, except for minimal debt inherited while acquiring INTO P&L Highlights FYs ending 03/31; C$000s FY 2013 FY 2014 FY 2015 *LTM Revenue 6,746 8,938 10,026 13,589 Growth Rate (%) 21.8% 32.5% 12.2% 35.5% Recurring Revenue 2,831 3,168 4,108 5,568 Growth Rate (%) 7.8% 11.9% 29.7% 35.5% Gross Profit 2,342 3,578 3,880 5,097 Gross Margin (%) 34.7% 40.0% 38.7% 37.5% Adjusted EBITDA ,484 1,219 1,671 EBITDA Margin (%) 6.7% 16.6% 12.2% 12.3% Net Income , Net Income Margin (%) 5.5% 31.1% 5.1% 2.7% S/O (Millions) Adjusted EBITDA excludes stock-based compensation 2. Net income is after corporate reorganization expenses of $622K 3. Shares outstanding as at January 21, mm Net Cash balance NTD: ~$3.2M at February 25,

14 Revenue (C$ M) Margin (%) WHERE WE ARE TODAY Avante s revenues have grown (organically and through acquisitions) over the last 4 years with a focus on growing highly valuable recurring revenue Gross Margin and EBITDA Margins have also increased during the same period: Management is confident that it can continue to grow margin dollars significantly in the coming 8 quarters Avante is now consistently cash flow positive and continues to accumulate cash Revenue, Gross Margin & EBITDA Margin (1) $12.6 $10.0 $8.9 $ % 40.0% 38.7% 38.8% 16.6% 6.7% 12.2% 12.5% $5.2 $2.8 $3.2 $4.1 F2013 F2014 F2015 LTM Period 100% 80% 60% 40% 20% 0% -20% Recurring Revenue Revenue Gross Margin EBITDA Margin 14 (1) Includes INTO since Aug 22, 2014 and LVS since April 1, 2015, annual revenue run rate is ~ $14.5 MM

15 C$ (000) % of EBITDA converted to FCF EXCELLENT CASH FLOW DYNAMICS Cash flow generative Minimal debt inherited from the INTO acquisition; low interest expense Capex light dynamic - very little capital expenditure required; the relocation of LVS to the ASI premises has required incurrence of leasehold improvements and equipment expenditure Recurring revenue has negative working capital dynamic collect first, then provide service Result is extremely high EBITDA to Cash conversion EBITDA-To-Free Cash Flow Conversion 2,000 1, % 91.3% 1, % 1, % 100.0% 75.0% 1, % % % -25.0% -1, % -1, % -2,000 F2013 F2014 F2015 LTM Adjusted EBITDA Capex EBITDA to FCF Conversion Ratio (%) % 15

16 Revenue (C$ M) RECURRING REVENUE GROWTH IS A FOCUS Both Recurring Monitoring & Response and Other Security & Transport have been trending upward Recurring revenue is important to track as it is very highly valued in the security space. It becomes valued even higher depending on the quality of the clients. The recently concluded acquisition of ADT by private equity firm Apollo Global Management was based on a value of 44 * RMR multiple. Increased at a CAGR of 36.9% rate during the last 8 quarters Other Security & Transport revenue has increased at a CAGR of 28.2% during the same period Q3-16 non recurring revenue was higher than Q3-15 due to growth in domestic and international secure transport, and the inclusion of revenues from INTO Electronics and LVS Inc. Revenue Composition Last 8 Quarters 4,500 4,000 3,500 3,000 2,500 1,908 2,026 2,402 2,000 1,823 1,684 1,500 1, ,372 1, , ,123 1,156 1,447 1,469 1,497 0 Q4-14 Q1-15 Q2-15 Q3-15 Q4-15 Q1-16 Q2-16 Q3-16 Period Recurring Monitoring & Response Other Security & Transport 16

17 STRATEGY AND OUTLOOK Strategy Going Forward Organic Growth Core Services to Markets Organic Growth New Offerings & Markets Acquisition Growth Strong recognized brand in high end security markets Pursue growth in core markets Pursue cross-selling opportunities between operating divisions Accelerate organic growth via referral base from sector expertise New marketing initiatives (i.e. Expedient deployment and growth in new geographies Recently introduced offerings include: Intelligent Perimeter Protection, International Travel Service, third party analytics monitoring Deep management expertise in M&A Large, fragmented market in security and trusted monitoring space Strong and developed deal pipeline Infrastructure (i.e. 24/7/365 Avante Control Centre) offers opportunities for synergies and significant accretion 17

18 ACQUISITION CASE STUDY Completed Acquisitions Pipeline INTO Electronics was acquired on August 22, 2014 for $2.4 mm of cash and 3,157,896 common $0.38 per share LVS Inc. acquired on April 1, 2015 for $2.7 mm of cash and 3,157,896 common $0.38 per share Targets include: Several high potential targets, similar to the INTO acquisition - small / medium sized companies in Canada and the U.S. Value generally determined by quantum of monthly recurring revenues and other intangibles which include Tech Services infrastructure, order pipeline, cross-selling opportunities within the group etc. Full service security providers in residential & commercial security Plan to make further acquisitions, with existing cash, debt capacity and deferred structuring mechanisms 18

19 TRADING COMPARABLES It is challenging to find true comparables given Avante s uniqueness and quality of recurring revenue but the peer group below trades at higher valuations, regardless of whether Avante is compared to security companies or surveillance technology companies (using latest released results) Trading Comparables As at February 12, 2016 Market Cap TEV Share Price S/O Run-Rate (LQA) (M, Local Currency) (M, Local Currency) (Local Currency) (M) P / Revenue EV / EBITDA P / E Security Companies AlarmForce Industries Inc C$ x 11.0x 20.8x Command Security Corp $ x NMF NMF G4S plc 3, , x 11.1x NMF The ADT Corporation 4, ,767.9 $ x 5.3x 17.4x Tyco International Ltd. 14, ,205.2 $ x 10.3x 46.8x Average 1.1x 9.4x 28.3x Security Technology & Surveillance Comparable Companies AlarmForce Industries Inc C$ x 11.0x 20.8x Avigilon Corporation C$ x 8.0x 14.0x Control4 Corporation $ x 15.4x NMF FLIR Systems, Inc. 4, ,933.0 $ x 9.2x 14.4x Verint Systems Inc. 1, ,297.7 $ x 13.8x NMF Average 1.7x 12.2x 16.4x Avante Logixx Inc C$ x 9.7x 19.7x 19 Note: AlarmForce appears on both lists as it amounts both to a traditional security firm and a surveillance company; all multiples based on Last Quarter Annualized

20 AVANTE LOGIXX KEY TAKEAWAYS Underfollowed Canadian based (TSX-V: XX) security and technology company that has gone through a recent turnaround around and now transitioning from a inward cost reduction focus to an outward focused organic growth and acquisition strategy Profitable with strong organic growth story with current and new offerings Very large yet fragmented market with acquisition opportunities and expertise to execute, with significant synergy opportunities. Track record of two successful deals In Avante Security, INTO Electronics and LVS, the Group companies are within close proximity of one another, with a 24/7 Control Centre which has the ability to monitor and respond as the Company scales up Attractive recurring revenue focused with negative working capital dynamic Strong balance sheet with no debt and cash accumulating each quarter Extremely high cash conversion with little capex requirements 20

21 Investor Presentation George Rossolatos, CEO Avante Logixx Inc. TSXV: XX OTC:ALXXF