PRESENTERS DOMINIC O’HANLON MARK MCLELLAN rhipe Limited · is appropriate for them, having regard...

PRESENTERS DOMINIC O’HANLON

CHIEF EXECUTIVE OFFICER 1H17 RESULTS PRESENTATION

17 FEBRUARY 2017

MARK MCLELLAN

CHIEF FINANCIAL OFFICER

rhipe Limited (ASX: RHP)

The Recipient, intending investors and respective advisers, should:

• conduct their own independent review, investigations andanalysis of RHP and of the information contained or referredto in this presentation;

• seek professional advice as to whether an investment in RHPis appropriate for them, having regard to their personalobjectives, risk profile, financial situation and needs; and/or

• nothing in this presentation is or is to be taken to be an offer,invitation or other proposal to subscribe for shares in RHP.

The Recipient specifically agrees, understands and acknowledges thatsome of the information contained herein has been provided by thirdparties (including all information regarding LiveTiles) and theBeneficiaries accept no responsibility for any inaccuracy,misstatement, misrepresentation or omission in relation to thatinformation.

Except insofar as liability under any law cannot be excluded, none ofthe Beneficiaries shall have any responsibility for the informationcontained in this presentation or in any other way for errors oromissions (including responsibility to any persons by reason ofnegligence).

This presentation has been prepared by rhipe Limited ACN 112 452 436(RHP). Each Recipient of this presentation is deemed to have agreed toaccept the qualifications, limitations and disclaimers set out below.

None of RHP and or its subsidiaries or their respective directors, officers,employees, advisers or representatives (Beneficiaries) make anyrepresentation or warranty, express or implied, as to the accuracy,reliability or completeness of the information contained in thispresentation, including any forecast or prospective information. Theforward looking statements included in this presentation involvesubjective judgment and analysis and are subject to significantuncertainties, risks and contingencies, many of which are outside thecontrol of, and are unknown to, the Beneficiaries. Actual future eventsmay vary materially from the forward looking statements and theassumptions on which those statements are based. Given theseuncertainties, you are cautioned to not place undue reliance on suchforward looking statements.

This presentation is a general overview only and does not purport tocontain all the information that may be required to evaluate aninvestment in RHP. The information in this presentation is providedpersonally to the Recipient as a matter of interest only. It does notamount to an express or implied recommendation with respect to anyinvestment in RHP nor does it constitute financial product advice.

2RHP 1H FY17 RESULTS PRESENTATION

SUMMARY

rhipe drives this consumption with value-added enablement services: training, consulting, marketing, support, reporting

and subscription billing services

Channel First

CloudFirst

Cloud services are not ‘sold’ or ‘shipped’ in a traditional sense. They are ‘consumed’ on a subscription basis.


rhipe’s business model has been built and refined for over a decade to drive the consumption of subscription services

Strategy & Competitive

InsightsChannel

Representation & Awards

Marketing Services (e.g.

MaaS)

Representing vendors with subscription

servicesCompli-mentaryVendor

Programs

Events, Training @ Know How(Business & Technical)

Reporting & Management

Portals

Billing & Collection Services

License Optimisation &

Compliance

Professional Services

(Deployment Acceleration)

Partner to Partner

Engagement

From linear to sophisticated multidimensional relationships

Next generation aggregator facilitates these interactions 17 APAC countries

RHP FY16 RESULTS PRESENTATION 5 5RHP 1H FY17 RESULTS PRESENTATION

Cloud Operations

Cloud first, digital first marketing transformation to drive demand

for channel partners. Billing, software-asset management

& license optimization.

Cloud Solutions

Professional services and support people to help Service Providers with

technical needs.

Cloud Licensing

Software sold and implemented by service providers.

Users pay based on usage.

+95% of Group revenues via channel B2B

5% of Group revenues from direct end user B2B customers

Support, IT and IP to support Licensing and Solutions

SupportServices and support to

position offerings for new licensing programs.

ValueAdd value with systems & ease

of trade for Cloud Service Providers.

LicensingBuild and expand on cloud licensing programs. Multi-vendor and multi

region.


· rhipe’s platform provides vendor usage reporting, provisioning and subscription billing services

· Significant value – add to service providers but also to vendors in driving the consumption and billing of their services

· An extensive API set – allowing partners to integrate rhipe’s platform with their own systems:

o Access to products and pricing

o Provision new tenants

o Manage existing tenants

o Transition existing O365 customer from another program into Microsoft CSP

o Purchase Add-ons for CSP customers

Search

Find

Qualify

Try

Order

Activate & Fulfill

Manage

Support

Up-sell

Refer

Acquire

Onboard

Engage


• Licensing gross margin 15.8%, up 50bps YoY4

o Largest customer 1%o Top 2-10 (ex largest): 4.5%o Tail 20%

• Licensing gross margin $ up 15% to $11m

• 1H FY17 Group gross margin (including Solutions) 18.3%

• Operating profit up 151% YoY to $1.4m

• Licensing operating profit up 101% YoY to $1.8m

• Solutions breakeven in Q2 FY17, following $0.35m5 operating loss in Q1 FY17

• EBITDA -$0.5m Q1 FY17 and $1.2m in Q2 FY17

• Jan 17 continues this trend, profitable in both divisions, with unaudited EBITDA of $500k

• Market transition from private to public cloud delivers strong CSP growth at expense of larger private data centres

• CSP now +92,000 seats up +100% in 1H FY17

• No. 1 CSP in AsiaPac, No. 6 in World

• 1,200 Partners onboarding/signed to CSP, +600 Partners now transacting

• Continued high growth in strategic focus areas of public cloud (CSP) and Asia

• Solutions restructure successful in Q1 FY17

• Strong balance sheet to allow investment in new opportunities

• Re-affirm $4m Reported EBITDA and +$8m Underlying EBITDA guidance

• South East Asia local sales +75% YoY6

• Attractive SEA market presence, positioned well for future growth as market matures

• Expect SEA to move to +ve operating profit by end of calendar year 2017

• rhipe awarded MS SPLA and CSP licences in South Korea in Feb 2017. South Korea is second only to Australia in size in APEJ

• Licensing revenue $70.0m1 (+12% YoY)

o Largest customer2 -29%o Top 2-10 (ex largest)3: +6%o Tail +20%

• Public cloud revenue (CSP) +1,000% to +$5m

o ARR CSP +$14m

o Strong growth +10% per month

8

1. Revenue excludes vendor rebates which are now treated as cost of sales. Licensing revenue inclusive of rebates was $75.7m as reported in prior years

2. rhipe chose not to renew a large non-profitable contract with largest customer3. Seeing transition from private to public cloud in large customers in Australia

4. Gross margin based on rebates included in cost of sales in accordance with accounting standards5. $0.35m includes non-recurring restructure cost of $0.2m6. SEA local sales exclude sales from ANZ customers billed in SEA

~~~

Revenue ($’000)FY15

ReportedFY16

Reported1H FY16Restated 1H FY17 1H FY16/17

Change (%)

Revenue 108,769 143,043 66,402 72,451 +9%

Gross Margin 20,083 25,767 12,967 13,282 +2%

Gross Margin (%) 18.5% 18.0% 19.5% 18.3% -120bps

Operating Profit 1,469 16 574 1,442 +151%

EBITDA Reported (excl one offs +SBP) 1,222 173 554 1,271 129%

EBITDA Reported (1,353) (918)1 (254) 684 +369%

Underlying EBITDA (excl investments) 4,896 5,160 3,274 2,814 -14%

Profit/(loss) before tax (1,535) 1,168 (341) 406 +219%

9

Refer to page 11 for further information on detailed break down to reported EBITDA and underlying EBITDA

• Group revenue up 9% YoY with Licensing revenue up 12% and Solutions revenue reduced by 33% following the Q1 FY17 restructure

• Gross margin impacted by Solutions restructure. Licensing Gross margin (~85% of Group Margin) increased by 50bps to 15.8%

• Reported EBITDA up 369% underpinned by 101% improvement in Licensing operating profit through operating leverage; EBITDA skewed to Q2 FY17 after $0.35m loss in Solutions in Q1 FY17

1. Excludes gain on sale of $2.4m from sale of stake in LiveTiles

1H FY17 FINANCIAL RESULTS

111. 1H FY16 figures restated following a change to accounting treatment of rebates. From 1 July 2016 rebates received from vendors now offset against cost of sales, previously included in revenue. 2. Solutions incurred restructuring costs of $0.1m in 1H FY173. Non operating expenses include share based payments expense, foreign exchange movements, restructuring costs, due diligence costs and prior year asset write-down

$’0001H FY16

(Restated)11H FY17

(Reported)Change

($)Change

(%)Revenue- Licensing- SolutionsTotal Revenue

62,7603,642

66,402

70,0162,435

72,451

7,256(1,207)6,049

+12%-33%+9%

Gross Margin- Licensing - SolutionsTotal Gross Margin

9,5743,393

12,967

11,0442,238

13,282

1,470(1,155)

315

+15%-34%+2%

Group Gross Margin %Gross Margin % - Licensing

19.5%15.2%

18.3%15.8%

--

-120bps+53bps

Operating Expenses- Licensing - SolutionsTotal Operating Expenses

8,6773,716

12,393

9,2452,595

11,840

568(1,121)(553)

+7%-30%-4.5%

Operating Profit- Licensing - SolutionsTotal Operating Profit

897(323)

574

1,799(357) 2

1,442

902(34)868

+101%-10%

+151%

Non Operating Expenses3 (828) (758) 70 -8%

Reported EBITDA (254) 684 938 +369%

Profit/(Loss) before tax (341) 406 747 +219%

29%

12

1H16

1H17

RHP 1H FY17 RESULTS PRESENTATION

$m

$m122% 90%14% 14%369%

1

1

1

1

1. Investment cost is net of gross margin generated in period

8.6 9.5 8.4

3.83.8

3.4

12.413.3

11.8

18.7% 18.8%16.3%

1H FY16 2H FY16 1H FY17

33.841.6

50.1

8.9

14.7

15.5

3.4

6.44.4

46.1

62.770.0

16.5%

15.2%15.8%

1H FY15 1H FY16 1H FY17

Tail Top 2-10 Top 1

Licensing revenue (excl rebates) (A$m)

Group Opex (A$m)

Gross Margin


(Gross Margin restated in line with new treatment of rebates)

Operating Leverage (Opex/Revenue)

Non-Employment Expenses

Opex ~5%YoY

Employment Expenses

Share of Gross Margin $

~8%Top 10

~92%Tail

14

0

2

4

6

8

10

12

14

16

18

20

Sep-16 Oct-16 Nov-16 Dec-16 Jan-17

Cash balance (A$m)


December collections impacted by holiday period. Consistent with prior years

Cash as 30-Jun 16

Capex Tax Paid Cash at 31-Dec 16

Proceeds from

Issue of Shares

Net Movement in Trade

Receivables/Payables

EBITDAExcl. SBP(non-cash)

Average cash balance in Q2 FY17 $13.3m $mCash balance as at 16 February 2017 $12.5m

Cash as 31-Dec 15

Cash as 16-Feb 17

FY16 Staff

Bonuses

-0.1

1.2

-0.450

0.018

Q1 FY17 Q2 FY17

Quarterly Revenue (A$m) Quarterly Gross Margin (A$m)

Quarterly Reported EBITDA (A$m)

15

32.9 37.1

Q1 FY17 Q2 FY17

1.11.3

Q1 FY17 Q2 FY17

Licensing Solutions

5.2 5.9

Q1 FY17 Q2 FY17

1.01.2

Q1 FY17 Q2 FY17

Licensing Solutions

Quarterly Operating Profit (A$m)

0.31.5

Q1 FY17 Q2 FY17-0.400

0.046

Licensing Solutions Licensing Solutions


Q1 FY17 Q2 FY17

13% 18% 14% 15%

$0.45m$1.3m$1.2m $0.446m

Q1 FY17 Q2 FY17

GROWTH IN NEW INVESTMENTS

2538

48 5577

103

51

4

19

32

40

19

0

20

40

60

80

100

120

140

160

FY11 FY12 FY13 FY14 FY15 FY16 1H17

AUSTRALIA AND NEW ZEALAND

SOUTH EAST ASIA

0

100

200

300

400

500

600

700

800

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

SINGAPORE THAILAND MALAYSIA INDONESIA PHILIPPINES

Quarterly Cumulative partner agreements in SEA

ThailandApr 2013Malaysia

Feb 2014Singapore

since 2012

Indonesia Jul 2014

PhilippinesSep 2013

$m

Long history of strong growth delivered via new customers, new programs and new regions

c.800 partner agreements from c.500 partners now in South East Asia, growing strongly

77

1. Annual revenue not restated for prior years. Comparison is on a like for like basis2. SEA revenue inclusive of ANZ arbitrage customers (large customers in ANZ procuring software through SEA)

FY13 FY14 FY15 FY16 FY17

77

17

2

1

Restated

+75% growth in local sales

5.0

5.5

6.0

6.5

7.0

7.5

8.0

Jun-15 Dec-15 Jun-16 Dec-16

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

rhipe’s combined Cloud business continues to grow in all countries

624signed and now

transacting(Activation ratio 68%)

923signed partners

311partners on-

boarding to CSP

57%Net-new partners to

rhipe

16-Feb-1792,149

Average revenue: c.$13 per seat per month

310 at 21-Nov-16 795 at 21-Nov-16 542 at 21-Nov-16 53% at 21-Nov-16

75,100 at 21-Nov-16

11,510 at 26-Nov-15

18

38,289 at 3-Jun-16


Jun-15

0

0.3

0.6

0.9

1.2

1.5

Jun-15 Dec-15 Jun-16 Dec-16

$m

CSP

$m

MSFT SPLA

Pattern beginning to emerge with transition from private to public

INDUSTRY UPDATE

USD195 Billion

Global Public Cloud Market size by 2020

rhipe is well-positioned to capture this Cloud opportunity. We have the programs, people and systems today to deliver

on the Public, Hybrid or “Whole of Cloud” future

1. Reference - IDC Worldwide Public Cloud Services Spending Guide August 2016


CAGR = 24%CAGR = 38%IDC – #US40709515, Dec 2015IDC – #259066, Sept 2015

884 1,335 1,750 2,195 2,595 3,0417761,363

2,0632,925

3,991

5,289

2014 2015 2016 2017 2018 2019

APEJ - ODHPC APEJ - DHPC

APEJ hosted private cloud Services (On demand & dedicated), Revenue usdm’s

1,660

2,698

3,813

5,120

6,586

8,330

1,909 2,288 2,713 3,208 3,762 4,387222293

357438

534646

1,4852,161

2,905

3,748

4,663

5,617

2014 2015 2016 2017 2018 2019

SaaS PaaS IaaS2

APEJ PUBLIC CLOUD(BY SERVICE MODEL), revenue usdm’s

3,616

4,742

5,975

7,394

8,959

10,650

rhipe existing core revenue opportunity rhipe new revenue opportunity


Differences in adoption rates by country


INDIRECT CSP: WHOLESALE DIRECT CSP: RESALE

rhipe #1Estimated market share +40%

Dozens of direct CSP’s and only a handful sell in volume.

Average RPU per seat: $8

ISV ISP TELCO

Eg. Sells O365 with their Solution(word/excel is an add on to their solution)

Eg. Sells email with website

Eg. Phone customers. Sell O365 as add on to the phone bill

Direct is an add on sale

rhipe’s Partner Channel: 600+ service providers managing IT environment and infrastructure on behalf of SMB and Enterprise Customers.

7 Indirect CSPs in AU; 10 in SEA

Average RPU: $13

22

By 2020 ≥ 50% of net new IT spend will be cloud based

Non-cloud Enterprise applications 20%

Microsoft CSP will cannibalise other traditional programs eg Open

For full report please visit: www.rhipe.com/about/investors/


Research by Acuitas Consulting Commissioned by rhipe, Feb 2017

80% of CSP seats will be sold by Indirect (wholesale) providers

such as rhipe

Australia, Korea, Japan and NZ are most attractive to Cloud Service Brokers due to size,

demand drivers, and government support

Other SEA economies are smaller in the short

term but have large long term potential

Pay-as-you go models will account for

50% of spending. rhipe’s business model has been built and refined for over a decade to

drive the consumption of subscription services

$m

0

25

50

75

100

2017E 2020F

AustraliaSouth East AsiaJapanSouth KoreaNew Zealand

Assumptions:

1. rhipe maintaining an average revenue of $13 per user per month

2. rhipe capturing 40% of the addressable market for indirect CSP. (rhipe is currently tracking as number 1 in APAC with share above this target.)

ARR~$31m

ARR~$99m

rhipe’s potential CSP Market Revenue

http://www.rhipe.com/about/investors/

RECENT WINS

INDUSTRY AWARDS seaIndustry awards australia


ARN Software Distributor of the Year 2016

Avanade Australia Partner Award: Emerging Partner of the year 2016

Excellence in Wholesale Distribution Award (Microsoft)

Excellence in Licensing Award (Microsoft)

Excellence in Marketing Award (Microsoft)

APEJ Aggregator of the Year 2015 Thailand (Zimbra)

First CSP Partner to Reach 1000 Seats in Indonesia

FY16 Cloud Solution Provider (CSP) of the Year in Thailand

South Korea is one of the two largest SPLA markets in Asia

Pacific excluding Japan (APEJ) for Microsoft

Provides significant growth potential for rhipe’s offerings

A platform for rhipe to expand into other North Asian countries such as Japan

rhipe in discussions with potential partner

organisations in South Korea

Reinforces rhipe’s position

as the strategic company

of choice in Asia Pacific

for Microsoft’s private

cloud and public cloud

offerings


MARKET POSITION INVESTMENTopportunity

Typically a new geography requires ~$500K over the first 12 months

No significant impact on FY17

White Label Support as a Service for Partners

Expansion of White Label Help Desk Operations

Short-term path to profitability


Q3 FY17 undertaking a pilot for support services

for one of the world’s largest software vendors

27

White Label Support for Vendors

24/7 SupportHiring based

upon demands

If successful, program to continue

expanding in FY18 and beyond

Opportunity for expansion across

all of rhipe’smarkets

New stream of marginImmediate Revenue Stream

Existing opportunity New opportunity


• rhipe continues to invest in intellectual property and focus on customer experience

• Investment in SEA continuing with regions moving towards operating profit in calendar year 2017

• Expansion into North Asia begins with South Korea

• Continue to evaluate additive software vendors and services to current operations

• Expand support to build on demand

• Management focused on delivering $4m reported EBITDA and +$8m underlying EBITDA

• Revenue growth continues in new programs and new regions but impacted by decline in largest low margin clients. Targeting +20% YoY revenue growth in profitable tail

• Maintain gross margin at 14% to 16%

• Group cost base target for FY17 reduced by 6% to ~$24.5m

• 2H FY17 expected to be stronger than 1H FY17 consistent with prior years. January profitable month for both licensing and solutions, combined EBITDA $500k

CONTACT DETAILSDOMINIC O’HANLON MARK MCLELLANCHIEF EXECUTIVE OFFICER CHIEF FINANCIAL OFFICER [email protected] [email protected]

THANK YOU

PRESENTERS DOMINIC O’HANLON MARK MCLELLAN rhipe Limited · is appropriate for them, having regard...

Documents

Transcript of PRESENTERS DOMINIC O’HANLON MARK MCLELLAN rhipe Limited · is appropriate for them, having regard...