Rakon HY2018 Results & Business Update Presentation

©2015 Rakon Limited
HY2018 Financial Results
& Business Update
©2017 Rakon Limited 16 November 2017
Enabling Connectivity

1
Agenda HY2018
AgendaItemPresenter
HY2018 Financial Key PointsSimon Bosley (Chief FinancialOfficer)
HY2018 Key AchievementsBrent Robinson (CEO, Managing Director)
MarketUpdateBrent Robinson
Q&A Session
Closing CommentsBrent Robinson
Appendix
Brent
Robinson
Simon Bosley

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HY2018 Financial Key Points

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Return to profit in HY2018
Net profit after tax of NZ$0.9 million vs. net loss of
NZ$5.7 million in HY2017
Underlying EBITDA
1
of NZ$3.8 million vs. NZ$0.6 million
in HY2017
Revenue up on prior year in all key markets
Total revenue up 5% vs. HY2017 and up 7% on a USD
currency basis
Global Positioning revenue up 13% with strong GNSS
volume business
Space & Defence revenue up 8% with growth from US
defence market
HY2018 Key Points
Note: The release of HY2018 results is based on unaudited financial statements
1
Refer to Slide 16 ‘Non-GAAP Financial Information’ for a definition of Underlying EBITDA and reconciliation to NPAT
NZ$0.9m
487%
NZ$0.9m
▲116%
Revenue
Net profit
Underlying
EBITDA
1
NZ$48.3m
▲5%
NZ$3.8m
▲487%
▲13%
▲8%

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Gross profit up from revenue growth and product mix
Product mix drives margin % increase –42% in HY2018 vs.36%
in HY2017
Release of NZ$0.7 million deferred revenue from Siward
technology license
Operating expenses down NZ$1.2 million as prior year cost
reduction initiatives flow in
Finance costs down NZ$0.5 million from reduced debt
levels in the current year
Positive operating cash flow for the period of NZ$4.9
million
HY2018 Key Points
Net Profit Bridge –HY2017 to HY2018

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HY2018 Financial Overview
Depreciation & amortisation
decline continues due to past
years lower capex trend
Positive operating cash flows
continue on from previous half
year period
Positive operating cash used to
further reduce borrowings and
net debt since end of last FY;
forecasting to turn net cash in
second half
Note: The release of HY2018 results is based on unaudited financial statements
1
Refer to Slide 16 ‘Use of Non-GAAP Financial Information’ for a definition of Underlying EBITDA and reconciliation to NPAT
NZD Millions
HY2018
HY2017
% change
+better
|
-worse
Volumes
(millions)
22.9
24.0
-5%
Revenue
48.3
46.0
+5%
Gross profit
20.1
16.7
+21%
Operating expenses
19.5
20.7
+6%
Underlying EBITDA
1
3.8
0.6
+487%
Depreciation & amortisation
2.3
2.8
+18%
Net profit/(loss) after tax
0.9
(5.7)
+116%
Earnings
(cents per share
)
0.4
(3.0)
+113%
Operating cash flow
4.9
(0.6)
+905%
Capital expenditure
1.1
1.7
+39%
Bank borrowings
2.5
18.9
+87%
Net debt
0.3
19.7
+98%
Shares on issue at balance date
(millions)
229.1
191.0
+20%

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HY2018 Key Achievements

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Further integration of Siward and Rakon relationship
Good progress on technology license transfer; of future
benefit to Rakon and Siward
CM & ODM product offering on track for release in FY2019
Technology development
Two new ‘world first’ product platforms (leading in size,
cost and performance), now sampled into high speed
networks and 5G applications
HY2018 Key Achievements

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Thinxtra
Completion of successful Series-B capital raising (AU$20
million) at a significant premium to Rakon investment
With capital raise over subscribed, opportunity taken by
Rakon with partial share sale at a gain of AU$1.8 million –to
be included in second half 2018 financial result
Share sale at AU$15.05 vs. average initial investment at AU$5.86
per share
Following completion of the share sale in Q3 Rakon will hold
785,407 shares in Thinxtra
The Directors will consider in the second half whether Rakon’s
investment in Thinxtra should be fair value accounted & reported
(currently equity accounted as an Associate)
Timemaker (China)
Strong turnaround in last 18 months contributing to Rakon’s
profit
Opened second factory in Sichuan to expand manufacturing
for crystal blanks in readiness for expected growth
HY2018 Key Achievements continued...

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Market Update

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Telecommunications
Mobile base station revenue continued on from Q4 FY2017 with a stronger run
rate in Q1, however eased in Q2
Datacentre demand contributed to an overall upside in HY2018
Positioning
HY2018 revenue remains at a higher run rate than the prior year
The high volume GNSS module business remains strong
Growth continued in the higher margin industrial markets
Space
Modest growth on previous half year
Defence
The US market delivered the growth in HY2018
HY2018 growth is mainly from products made in NZ
IoT
Many new applications, but volumes still small
Market Update –HY2018

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Telecommunications
In the US and Europe, Q3 run rate is expected to remain flat, with a small upside
forecast for Q4
Further upside in the developing regions, is dependent on the timing of when a
major operator in India releases new equipment contracts
Positioning
Current run rates and forecast support the view that this market is returning to
growth after years of decline due to smartphones cannibalising traditional PND
products
Space
Delivery of new customer orders in the US will provide an upside for the full year
Defence
Delivery of open orders from France will deliver higher revenue in second half
US demand expected to drive further growth
IoT
New applications driving a lot of activity; higher volumes expected beyond
FY2018 as trials get deployed
Market Update –Outlook

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Q&A Session

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Closing Comments

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Closing Comments
HY2018
Financial performance has stabilised and
improved as expected
Modest growth seen as an indicator that the
bottom of the cycle has passed
Closing Comments
The phased delivery of Space & Defence orders
will result in revenue growth in the second half
Focus on improving CRI profit contribution
Gains relating to the partial sale of Thinxtra
shares to be reported in the second half
Full year earnings guidance unchanged;
expecting to report Underlying EBITDA in the
range of between NZ$10.7 million to NZ$12.7
million (FY2017: NZ$4.0 million)

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Appendix

16
DisclosureofNon-GAAPFinancialInformation
Rakonhasused‘UnderlyingEBITDA’asameasureofnon-GAAP
financialinformationinthisannouncementanditisdefinedas:
“earningsbeforeinterest,tax,depreciation,amortisation,
impairment,lossondisposalofassets,employeeshareschemes,
non-controllinginterests,adjustmentsforassociatesandjoint
venturesshareofinterest,tax&depreciation,andothercash&non-
cashitems.”
‘UnderlyingEBITDA’isanon-GAAPmeasure,withitspresentation
notbeinginaccordancewithGAAP.TheDirectorspresent
‘UnderlyingEBITDA’asausefulnon-GAAPmeasuretoinvestors,in
ordertounderstandtheunderlyingoperatingperformanceofthe
Groupandeachoperatingsegment,beforetheadjustmentof
specificnon-cashchargesandbeforecashimpactsrelatingtothe
capitalstructureandtaxposition.‘UnderlyingEBITDA’isconsidered
bytheDirectorstobetheclosestmeasureofhoweachoperating
segmentwithintheGroupisperforming.Managementusesthe
non-GAAPmeasureof‘UnderlyingEBITDA’internally,toassessthe
underlyingoperatingperformanceoftheGroupandeachoperating
segment.
Theuseof‘UnderlyingEBITDA’inthispresentationforHY2017and
HY2018hasbeenextractedfromunauditedfinancialstatements.
Theuseof‘UnderlyingEBITDA’inthispresentationforFY2017has
beenextractedfromauditedfinancialstatements.
Non-GAAP Financial Information
Reconciliation of Underlying EBITDA to net profit/(loss) for the year
Unaudited six
Unaudited six
Audited year
months ended
months ended
ended
30 September
30 September
31 March
2017
2016
2017
Continuing operations
$000s
$000s
$000s
Underlying EBITDA
3,800
647
4,032
Depreciation and amortisation
(2,307)
(2,800)
(5,609)
One off cash gains realised on derivatives closed out
941
(1,361)
(1,096)
Employee share schemes
(8)
(29)
(42)
Finance costs
̶ net
(227)
(687)
(1,432)
Adjustment for associates and joint venture share of interest, tax and
depreciation
(1,032)
(980)
(2,079)
Impairment
-
-
(6,594)
Loss on asset sales/disposal
(12)
(4)
(296)
Other non
̶

cash items
(94)
(215)
(375)
Profit/(loss) before income tax
1,061
(5,429)
(13,491)
Income tax expense
(153)
(269)
(67)
Net profit/(loss) for the period
908
(5,698)
(13,558)

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