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A V A N T E L O G I X X | S E P T E M B E R 2 0 1 8
C R A I G C A M P B E L L , C E O
Avante LogixxAnnual and Special Meeting of Shareholders
September 19, 2018
This presentation may contain “forward-looking information” within the meaning of applicable securities legislation. Generally, forward-looking information 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”. In particular, this presentation contains statements regarding: potential acquisition targets
of Avante Logixx Inc. (“Avante”); the ability of Avante to execute on its strategic plan and acquisition strategy; the estimated transaction models for future acquisition; and the estimated potential value creation and
total shareholder returns which management believes may be realized by Avante’s acquisition strategy. All such forward-looking information is based on certain assumptions and analyses which management of
Avante believes to be reasonable in light of its experience and perception of historical trends, current conditions and expected future developments, as well as other factors that management believes to be
appropriate in the circumstances. Such assumptions include: trends in the physical security industry; the ability of Avante to raise capital on acceptable terms; general and administrative expenses and interest
expenses; Avante’s ability to maintain existing customer, supplier and partner relationships; the ability of Avante’s management team to execute Avante’s business strategy, and other matters.
Statements containing forward-looking information 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
to be materially different from those expressed or implied by any statements containing forward-looking information. The risks, uncertainties and other factors are difficult to predict and may include, without limitation,
risks relating to: general economic conditions; industry conditions; the ability of Avante to raise capital; operating risks; risks inherent in the ability to generate sufficient cash flow from operations to meet current and
future obligations; increased competition; stock market volatility; opportunities available to or pursued by Avante, and other factors, many of which are beyond Avante’s control. The foregoing factors are not
exhaustive. Although Avante has attempted to identify important factors that could cause actual results to differ materially from those statements containing forward-looking information, 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 information. Avante does not undertake to update any statements containing forward-looking information,
except in accordance with applicable securities laws.
Any “financial outlook” or “future-oriented financial information” in this presentation, as defined by applicable securities legislation, has been approved by management of Avante. Such financial outlook or future-
oriented financial information is provided for the purpose of providing information about management’s current expectations and plans relating to the future. Readers are cautioned that reliance on such information
may not be appropriate for other purposes.
Any data, graphs or information in this presentation that have been compiled by, or drawn from, a third party has been credited to that third party and Avante does not take responsibility for the accuracy of such
information.
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
www.sedar.com.
Non-IFRS Financial Measures
This presentation contains certain financial measures that are not determined in accordance with IFRS, including Adjusted EBITDA.
• Adjusted EBITDA is calculated by adding back: Expense fair value adjustment of CWL inventory; Depreciation on property, plant and equipment; Amortization of intangible assets; Share based payments; and
Management reorganization & integration costs to Income before income taxes. Adjusted EBITDA is used by management of Avante to provide a more accurate measure of its operating performance.
These measurements should not be considered an alternative to, or more meaningful than, other measures as determined in accordance with IFRS. These measurements do not have a standardized meaning under
IFRS; thus, Avante’s determination of Adjusted EBITDA may not be comparable to that reported by other companies. Reference should be made to Avante’s management’s discussion and analysis and related
financial statements for more information relating to the calculation of Adjusted EBITDA.
A V A N T E L O G I X X 2 0 1 8
F O R W A R D - L O O K I N G S T A T E M E N T S & D I S C L A I M E R
S E C U R I N G T H E F U T U R E
Building a Diversified Security Platform
Through Multiple Acquisitions and Organic Growth
A V A N T E L O G I X X | S E P T E M B E R 2 0 1 8
C R A I G C A M P B E L L , C E O
3
W H A T W E W I L L D I S C U S S T O D A Y
Why the Security Industry 5
4
The Avante Platform Today 8
Building for the Future 13
A V A N T E L O G I X X | S E P T E M B E R 2 0 1 8
C R A I G C A M P B E L L , C E O
5
W H Y T H E S E C U R I T Y I N D U S T R Y
6
W H Y T H E S E C U R I T Y I N D U S T R Y
Fragmentated
& Active Market
Established
Value Prop
Macro
Trends
Recession
Resilient
Active M&A
Market
Consistent
FCF
• Proven value-add for clients • Improved service and reducing
costs.
Established Value Proposition
• Outsourced security services are highly cash generative
• Low capex and working capital requirements
• Average conversion rate of EBITDA to FCF >85%
Consistent Free Cash Flow (FCF)
• Active M&A marketplace• Large strategic and PE participation providing multiple
exit opportunities
Active M&A Marketplace
SecurityIndustry
• Highly fragmented market, ripe for further consolidation
Fragmented Market
• Security services industry is a large, stable market
• Revenues of $3.7billion CAD in 2017
• Security services industry 0.6% CAGR 2017 to 20221
• Security alarm services 2.1% CAGR 2017 to 20222
Strong Macro Trends
• Diversified client base• Increased security concerns
supports consistent security spend
Recession Resilient
1. Ibisworld Industry Report – “Security Services in Canada” – Nov 20172. Ibisworld Industry Report – “Security Alarm Services in Canada” – April 2017
Security is a Megatrend
• Driven by global tension, widening gap in
socioeconomic drivers, urbanization and digitization.
• Cost of manpower is going up, cost of technology is
going down
7
O P P O R T U N I T I E S E V E R Y W H E R E E V E R Y D A Y
✓ Cameras
✓ Access Controls
✓ Intrusion Systems
✓ Guards
✓ Patrols
✓ Video Analytics
✓ Employee background screenings
✓ Corporate investigations
✓ High security locks
✓ Secure Transport
✓ Internet Monitoring
✓ Insider Risk Programs
✓ Safe & Vault Services
You see a streetscape.
We see infinite potential.
A V A N T E L O G I X X | S E P T E M B E R 2 0 1 8
C R A I G C A M P B E L L , C E O
8
T H E A V A N T E P L A T F O R M T O D A Y
S T R A T E G I C B U S I N E S S U N I T S
H O L D I N G C O .
PROTECTIVE
SERVICES
MONITORING
& MANAGED
SERVICES
ELECTRONIC
SECURITY /
AUTOMATION
SECURITY
DEVICES &
HARDWARE
INVESTIGATION
&
INTELLIGENCE
CYBER
Strong Portfolio United by a Common Business Model
A V A N T E T O D A Y - B U I L D I N G A P L A T F O R M T O B E T H E L E A D E R I N T E C H N O L O G Y E N A B L E D
S E C U R I T Y S O L U T I O N S
9
Revenue Contribution (FY 18)SBU
MONITORING
& MANAGED
SERVICES
PROTECTIVE
SERVICES
ELECTRONIC
SECURITY /
AUTOMATION
SECURITY
DEVICES &
HARDWARE
INVESTIGATION &
INTELLIGENCE
CYBER
1 Outstanding brand and market
leader
2 Extensive install base
3 Strong “captive” recurring
revenues
4 High level of customer intimacy
22.7%
14.3%
32.2%
30.8%
0.0%
0.0%
Guards, executive protection, executive response, and secure transport services. Executive
response consists of an attractive subscription based business model providing recurring
monthly revenue (RMR) that breads high retention and customer lifetime value (LTV). This
has historically proven to be a stable and modestly growing vertical with an expanding
customer base. Protective Services is a $3.7B market in Canada with a projected CAGR of
0.6% through 20221 and a $33.8B market in the US with a projected 1.4% CAGR through
20222.
1.Ibisworld Industry Report – “Security Services in Canada” – Nov 2017
2. Ibisworld Industry Report – “Security Services in the US” – June 2017
3. Ibisworld Industry Report – “Security Alarm Services in Canada” – April 2017
4. Ibisworld Industry Report – “Security Alarm Services in the US” – May 2017
5.Global Market Insights – “Electronic Security Market Size By Product” – October 2017
6.Global Market Insights – “Electronic Security Market worth over $60bn by 2024” – October 2017
7.Grand View Research – “Smart Home Automation Market Analysis By Component” – August 2017
8.Allied Market Research – “Home Automation Market by Application” – June 2017
P O R T F O L I O O V E R V I E W
Protective Services
Monitoring & Managed Services (MMS)
Alarm monitoring, alarm response, international travel, and intelligent video
response services. MMS largely consists of an attractive subscription based business
model providing consistent RMR that breads high retention, an LTV, and is also a
high margin business. MMS is a $1.1B market in Canada with a projected CAGR of
2.1% CAGR through 20223 and a $22.3B market in the US with a projected 2.0%
CAGR through 20224.
Electronic Security/ Automation
Smart home integration as well as integrated systems including CCTV, access control, and
intrusion detection. Electronic Security is a $27B market globally5 and is projected to reach
$60B globally by 20246. Home automation is a $46B market globally7 and is projected to
reach $81B by 20238. There is a massive opportunity in this vertical as smart home adoption
continues to steadily increase and become mainstream buoyed by better smart software,
technology inclined millennials, improvements in the interoperability of smart devices, and
the rise of voice-enabled platforms like Amazon Echo/ Alexa reaching mainstream adoption
in North America. Electronic Security/ Automation will be key to our “own the home” vision.
10
Lock repair, high security locks, as well as safe and vault services. SD&H has historically
proven to be a steady vertical consisting of products manufactured across the entire price
spectrum with both high and low end products in order to satisfy all customer needs and
drive a broader audience. The continued integration of new technology into legacy devices
and hardware (e.g. electronic locks) serves as a tailwind for the vertical moving forward.
1.IBIS World Reports – “Private Detective Services” – August 2018
2.Mordor Intelligence – “Global Cyber Security Market” – April 2018
3.Mordor Intelligence – “Global Cyber Security Market” – April 2018
P O R T F O L I O O V E R V I E W
Security Devices & Hardware (SD&H)
Investigations & Intelligence
Background screening, pre-employment screening, insider risk programs, due
diligence, geopolitical risk consulting, integrity monitoring services. Investigations &
Intelligence is currently a $6B market in the US1. An attractive margin profile industry
that sees increased corporate activity and macroeconomic trends of outsourcing
as tailwinds for the vertical moving forward.
Cybersecurity
Cyber advisory, internet monitoring, managed detection and response, and open source intelligence services. Cybersecurity is a $103B market globally2 and is projected to reach $242B by 20233. Industry tailwinds include the growing severity and frequency of cyberattacks as digitization continues to be a global phenomenon for businesses and consumers. Global spend on cyber products and services is expected to exceed $1T by 2021 as the surface area for cyber threats becomes more pervasive due to the mass adoption of mobile devices, as well as the continued adoption of cloud computing and IoT devices. As such, cybersecurity can no longer be thought of as separate from physical security, where an integrated and holistic provider of security solutions will become more efficient and economical for consumers and business alike, leading to a greater user experience.
11
12
R E C E N T E V E N T S
CEOAnnouncement
On January 10, 2018
Craig Campbell is
announced as
Avante’s new CEO
First 30 days
1st 30 days spent
assessing XX’s
capabilities and
areas for
improvement.
Created a
strategic plan to
leverage and
enhance the firm’s
capabilities
J A N 2 0 1 8 F E B 2 0 1 8 M A Y 2 0 1 8
First 100 days
1st 100 days
reorganized the
business into
strategic business
units; amalgamated
Avante Security Inc.
& INTO Electronics
Inc.; added depth
and experience to
senior leadership
team; and began
implementing
strategic plan
J U N E 2 0 1 8 J U L Y 2 0 1 8 A U G U S T 2 0 1 8 S E P T E M B E R 2 0 1 8
Bought Deal Closed
Completed bought
deal public offering
of common shares for
aggregate gross
proceeds of
$8,625,000
Completed Architronics Acquisition
Executed share
purchase agreement
to complete the
acquisition of the
remaining 49%
interest in Architronics
Completed Watermark Security Acquisition
Executed share
purchase agreement
to complete the
acquisition of
Watermark Security
expanding consumer
base to Muskoka
Completed VeridinSystems Acquisition
Executed share
purchase agreement
to complete the
acquisition of Veridin
Systems expanding
commercial footprint,
while gaining large
nationwide accounts
A V A N T E L O G I X X | S E P T E M B E R 2 0 1 8
C R A I G C A M P B E L L , C E O
B U I L D I N G F O R T H E F U T U R E
13
K E Y S T R A T E G I C P R I O R I T I E S
Enhance portfolio with
strategic M&A
Drive organic growth by
selling technology-
enabled solutions
Strengthen our
competitive advantage
with investments in strong
business systems
14
15
G O I N G F O R W A R D H I G H L I G H T S
YR 1 YR 2 YR 3 YR 4 YR 5
Optimize operations and
geographic expansion
Expand geographic presence and
solution offerings through strategic
M&A and capital investments
Local Leader Market Leader
• Best-in-class operations
• Increase ARPU
(average revenue per
user)
• Foster innovation
• Implement best
practices
Vision
and
Growth
S E T T H E
D E S T I N A T I O N
• We have a clear vision
• We have a detailed
growth plan
• We have a structure
aligning stakeholder
interests
Market Leader
16
O U R P L A N
Growth in Invested Capital
per Share
High IRR / 5-6 year Payback
Period
Value Creation and Total Shareholder Returns
Build
Generate Cash
Acquire
Corporate Mission
Compound shareholder capital at 15% rates
over the long-term by prudently acquiring
and building a collection of high-quality
security businesses and continuously
reinvesting their cash earnings.
Maximize Re-Investment
Opportunities
Minimize Dilution
Focus on Payback &
IRR
Align Incentives &
ROIC
Security/
Defense
Industries
Value
Creation
Framework
Capital
Allocation
Model
17
O U R C O R P O R A T E 5 Y E A R P L A N
Growth Vision
• Deploy ~$50-$75 million of acquisition capital in the first
three years looking to acquire another beachhead
vertical in addition to tuck-in opportunities
• Each year, grow annual acquisition capital deployed, to
target of ~$200MM+ of cumulative capital in year five
• Optionality for larger, more material transactions to
accelerate above time frame if value creating
Financing growth
• Achieve a balanced mix of internal financing, shares,
debt and vendor take-back notes (“VTB”), carefully
weighed against risks. Early transactions may be more
dilutive
Transaction model
• Consideration to be paid in cash, Vendor Take Back
(“VTB”) notes, XX shares (if required). VTB issuances will
be subject to time and performance based vesting
$200MM+, cumulative
Acquisition Capital Deployed
Target $30MM
Run-rate EBITDA
ROIC of 14-15% after-tax,
after corporate overhead
“Return on Total Invested Capital”
• Type: Security System
Integrator
– Alarm systems
– Video systems &
analytics
– Property checks
– Guard response
– Property management
• Location: Muskoka
• Strategic Rationale: Able to
leverage current client base
and offer security services
for their cottages. A
business that has been on
“autopilot” for 3 years
providing significant upside
The three transactions below were announced and closed in Q2 FY19.
A N N O U N C E D T R A N S A C T I O N S
• Type: Home Automation
Integrator
– Home automation &
control
– Lighting control
– Automated shades
– Intelligent home network
• Location: GTA
• Strategic Rationale:
Promote cross-selling,
reduce overhead, align key
executives with the
renewed corporate
strategy, and unify culture
across strategic business
units
Architronics Limited Veridin Systems Canada Inc.
18
Watermark Security Inc.
• Type: Security System
Integrator
– Security systems
– Access control systems
– CCTV systems
– Video alarm verification
and analytics
– Alarm monitoring
• Location: GTA
• Strategic Rationale: Expand
commercial footprint, while
gaining access to large
nationwide accounts. Also
provides XX with a toehold
in the burgeoning cannabis
industry
Customer Retention
& Revenue Predictability
High ROIC
Strong FCF
Growth
Attractive Business
Economics
Competition
Margins
Acquisition
• $10 - $20MM in revenue• Contracted recurring revenue (>30%)• Sticky customer base• Low customer concentration, low attrition• Metrics: RMR, ARPU, Retention Rate
• Highly fragmented industry• Growing, niche industry that can be too small to
attract competition• Long product life cycles• Large addressable market
• Recurring revenue models• Low capital requirements• High customer lifetime value• Low customer acquisition cost• Minimal fixed asset requirements• Valuation metrics:
• 6– 8x EV/EBITDA• 5 – 7x Post Synergies
• Leveraged at corporate level• Consistent, growing FCF
• Stable, with leverage to fixed cost infrasctructure
• Gross margins >30%• EBITDA margin >10%
• Asset light model• Accretive to XX
• Consistent revenue growth• Consistent RMR growth
M & A T A R G E T S – I N V E S T M E N T C R I T E R I A
Financial Characteristics
Qualitative Characteristics 19
In summary:• Experienced CEO and management
team with a successful track record of creating value
• A dynamic team that has proven their ability to scale and grow a security business platform
• Industry expertise and a rapidly growing pipeline of potential acquisitions in the Canadian and American mid-market space
Build
Generate Cash
Acquire
Value Creation Framework
Capital Allocation Model
Security/Defense Industries
S U M M A R Y
S T R A T E G I C B U S I N E S S U N I T S
H O L D I N G C O .
PROTECTIVE
SERVICES
MONITORING
& MANAGED
SERVICES
ELECTRONIC
SECURITY /
AUTOMATION
SECURITY
DEVICES &
HARDWARE
INVESTIGATION
& INTELLIGENCECYBER
20
21
S U M M A R Y
✓ This is hard to do; we have done it before
✓ We are operators at heart
✓ We finish what we start
✓ We are a team with a vision
Why Our Team
Why Avante
✓ Robust Platform to execute a security industry consolidation strategy
✓ Deep industry expertise and an active management style resulting in greater value and return for
shareholders
✓ Experienced team that has built and exited large security services firms and have the experience
& knowledge to pursue a similar strategy on a larger scale and in shorter order
21
People Knowledge Technology