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Enabling the Digital World in the Home

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DIRECTV subscriber base projected to grow at a 7.7% CAGR from 15 million in 2005 ... DIRECTV reacting to the cable triple play with 'partnered offerings' and heavily ... – PowerPoint PPT presentation

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Title: Enabling the Digital World in the Home


1
180 CONNECT INC. INVESTOR PRESENTATION
Enabling the Digital World in the Home
2
Forward-Looking Statement
  • This investor presentation contains
    forward-looking statements which reflect
    Management's expectations regarding the
    Corporation's future growth, results of
    operations, performance and business prospects
    and opportunities. Statements about the
    Corporation's future plans and intentions,
    results, levels of activity, performance, goals
    or achievements or other future events constitute
    forward-looking statements. These statements
    reflect Management's current beliefs and are
    based on information currently available to
    Management. Forward-looking statements involve
    significant risk, uncertainties and assumptions.
    Many factors could cause actual results,
    performance or achievements to differ materially
    from the results discussed or implied in the
    forward-looking statements. These factors should
    be considered carefully and prospective investors
    should not place undue reliance on the
    forward-looking statements. Although the
    forward-looking statements contained in this
    investor presentation are based upon what
    Management believes to be reasonable assumptions,
    the Corporation cannot assure that actual results
    will be consistent with these forward-looking
    statements.

3
Table of Contents
  • Executive Summary
  • Business Overview
  • Satellite
  • Cable
  • Network Services
  • Digital Interiors Home
  • Growth Opportunities
  • Financial Overview
  • Conclusion

4
Executive Summary
5
180 Connect Overview
  • North Americas largest provider of installation,
    integration and fulfillment services to the home
    entertainment, communications, security and home
    integration service industries
  • Dominant player in rapidly growing industry
  • More than 3,300 highly-trained technicians and a
    fleet of over 3,000 Company-owned vehicles
  • Operates 85 branches across the United States and
    Canada
  • Performs approximately 2.5 million in-home visits
    per year
  • Only national contractor dedicated to the
    residential market
  • Scalable, market driven, technology centric
    operating service model
  • 2006E Revenue and EBITDA of 316 and 14.0
    million, respectively, representing revenue
    growth of 13 over 2005

180 Connect is in a position to leverage these
dynamics to become a leader in the broader home
services industry
1
6
The Critical Connection
QUALITY
HUMAN CAPITAL
TRAINING
Infrastructure
Trend toward outsourcing
Family of Companies
Ironwood Digital Interiors - Home Digital
Interiors Security Wirecomm Piedmont Network
Services
TECHNOLOGY
2
7
Business Transformation
  • Focus on Core Earnings and Cash Flow v. Revenue
    Growth
  • Intense analysis of technician efficiency, fleet
    utilization, use of sub- contractors and
    operating metrics
  • Local management compensation based on branch
    profitability
  • Significant focus on customer satisfaction
    experience, resulting in customer bonus
    eligibility
  • Balance Sheet Strengthening
  • Natural de-leverage of capital leases
  • As a result of prepaid insurance plan with
    current provider
  • Rebuilding True Partnership with Customers
  • DIRECTV desires greater throughput and customer
    satisfaction
  • Economic model rewards quality performance
  • Cable customers looking to expand 180 Connect
    within existing branch network
  • Develop New Programs associated with Core Assets
    2.5 million home visits per year

3
8
Diversified Service Offering
Satellite
Cable
  • Performs satellite installations, upgrades and
    service calls for DIRECTV residential and
    commercial customers
  • 54 branches, primarily in the western U.S., with
    approximately 2,800 technicians and 2,300
    Company-owned vehicles (COVs)
  • Second largest of 13 members in the DIRECTV HSP
    Network
  • Formulating up-sell initiatives to enhance
    margins
  • Performs residential cable installations,
    reconnections, disconnections, service upgrades
    and downgrades as well as general service calls
  • Operates in 28 branches, primarily in the eastern
    U.S., employing approximately 675 technicians
  • Growth in popularity of digital cable, VoIP, and
    data services are increasing the size of this
    business

Digital Interiors Home
  • Home integration services business that functions
    as a subcontractor to home builders and
    developers to install video, audio, security,
    telecommunications and data cabling in new homes
  • Developed through the acquisition of Digital
    Interiors in March 2005
  • Currently in California and Texas with expansion
    plans into the southwestern U.S.

4
9
Leading Provider of Outsourced Home Installation
Services
  • Ability to manage large contracts which are
    geographically dispersed
  • One of the largest members of the DIRECTV Home
    Service Provider (HSP) Network of installers
  • Largest installation contractor of cable services
    for Cablevision and Rogers
  • Superior quality and customer satisfaction
    ratings
  • Recently awarded contracts with ONteriors and
    Boise Airport

180 Connect Service Locations
Cable dominates serviceoffering in eastern U.S.
Satellite dominates serviceoffering in western
U.S.
Pro Line upsell, Digital Interiors and Network
Servicesbusinesses can leverage the existing
infrastructure
5
10
Large and Growing End-Markets
180 Connect is well-positioned to enable the
digital world in the home
  • DIRECTV subscriber base projected to grow at a
    7.7 CAGR from 15 million in 2005 to 22 million
    in 2010. DIRECTV reacting to the cable triple
    play with partnered offerings and heavily
    subsidized high definition equipment
  • Convergence of technology driving demand for
    additional installation services in the home,
    including Triple Play (voice, data and video)
    in the cable industry. Increased demand for
    fully integrated security offering into existing
    Triple Play platform
  • Strong upgrade trend from basic to digital cable
  • Introduction of a variety of other new
    technologies (e.g.,HDTV, DVRs, increased local
    channel access, foreign language programming) in
    both cable and satellite markets
  • Growth of digital homes wired for sound,
    security, and data combined with historically
    strong housing starts (in 2006 over 60 of the
    two million new homes built will have an advanced
    structured wiring feature built into the base
    specifications)
  • Market primed for consultative up-sell arising
    from the complexity of in-home technology which
    supports 180 Connects up-sell initiative.

6
11
Significant Operating Leverage Margin Expansion
Opportunity
  • Recent investments in infrastructure, personnel
    and vehicles position the Company to realize the
    benefits of significant growth opportunities
  • Centralized back-office and off-shore call center
    operations
  • Fleet of over 3,000 Company-owned vehicles
  • Additional margin expansion opportunities
    available through product and market synergies,
    further benefits of scale, the elimination of
    redundant corporate overhead and improved
    insurance rates

7
12
Strong, Experienced Management Team
M. Brian McCarthyExecutive Director35 Years of
Experience
Peter GiacalonePresident CEO25 Years of
Experience
Nick WainwrightPresident Cable20 Years of
Experience
Steven WestbergCFO30 Years of Experience
Brian DalmassPresident Digital Interiors
and Network Services20 Years of Experience
Ed NollingerSenior VP Business Operations 34
Years of Experience
Zachary McGuirePresident Satellite 15 Years
of Experience
  • Over 150 years of combined experience primarily
    in the satellite, cable and telecommunications
    industries
  • Proven record of successful entrance into
    adjacent markets with rapid revenue growth

8
13
Recently Completed Initiatives
  • Deployed over 2,200 new Company-owned vehicles in
    2005
  • Launched Network Services, a fiber network
    engineering line of business that has earned
    significant new contracts
  • Acquired Digital Interiors
  • Consolidated all back-office functions to one
    shared service center
  • Relocated a portion of call center operations
    off-shore
  • Upgraded technical skills of over 3,300
    technicians
  • Recruited top IT professionals enhancing controls
    and financial reporting
  • Initiated remote technician dispatch
  • Initiated regionalized dispatch operations
  • Completed the re-financing of the Companys long
    term debt

9
14
Business Overview
15
Satellite
16
Satellite
10
17
Cable
18
Cable
11
19
Network Services
20
Network Services
12
21
Digital Interiors Home
22
Digital Interiors Home
13
23
Growth Opportunities
24
Growth Opportunities
180 Connect has positioned itself for significant
growth driven by a combination of opportunities
across each of its business components
  • Cable and satellite operators are increasingly
    outsourcing residential services to professional
    installers
  • Strong DIRECTV subscriber growth and cable
    subscriber churn will continue to drive increased
    installation volume
  • 180 Connect has earned significant DIRECTV
    customer satisfaction bonus in 2006 and is
    consistently ranked number 2 or 3 in the HSP
    network
  • Increased demand for new products and technology
    upgrades will result in additional upgrade truck
    rolls
  • Leverage infrastructure into complementary
    services

14
25
Financial Overview
26
Historical and Projected Revenue
( in millions)
2004-2006E CAGR 22.65
15
27
Historical and Projected EBITDA
( in millions)
2004-2006E CAGR 50.6
16
28
2005 A Year of Transition
  • Rapid growth significant growth related costs
  • Deployed 2,200 new service vehicles and 950 new
    field technicians
  • Upgraded technical skills of over 3,300
    technicians
  • Recruited top IT professionals to focus on work
    order and supply chain systems
  • Consolidated back office functions in Denver
  • Settled Mountain Center acquisition liabilities
    and several longstanding DOL claims
  • Company repositioning five operating lines of
    business poised for contribution
  • Launched Network Services and integrated Digital
    Interiors
  • Relocated major portion of call center operations
    off-shore
  • Launched Pro Line upsell
  • Positioned for strong future growth
  • Maturity of growth related costs behind us

17
29
EBITDA Margin Improvement Initiatives
Reduced Subcontractor Rate Card Strategically
Deploy Based on Seasonal Trends
Fleet Conversion
GACost Reduction
Safety Training- Improved Insurance Trends
ImprovedConsumable Sourcing
Margin Improvement
Off-Shore CallCenter
Direct Sales
Technician Up-Sell Program Proline
18
30
Balance Sheet Strengthening
  • Refinancing Completed
  • Debt refinance of up to a maximum of 57 million
    of debt available comprising a revolving credit
    facility and a term facility with interest rates
    ranging from prime plus 3 to prime plus 5.
  • Excludes 32.7 million of capital lease
    obligations
  • Recently completed 10 million refinancing of
    fleet resulting in 2.1 million of incremental
    cash flow

19
31
Balance Sheet Summary
( in millions)
  • Long-term debt includes current portion.
  • Capital lease obligations includes current
    portion.

20
32
Capital Expenditures and Working Capital
Capital Expenditures Summary
( in millions)
  • Capital expenditures, excluding fleet purchases,
    projected to be between 2.6 million and 2.5
    million annually over next three years
  • Capital expenditures relate primarily to
    supporting the Companys IT initiatives
  • The Company also transitioned to a Company-owned
    vehicle model, resulting in purchasing 2,200 new
    vehicles to replace privately-owned vehicles

21
33
Conclusion
34
Investment Highlights
  • Leading Provider of Outsourced Home Installation
    Services
  • One of the largest members of the DIRECTV Home
    Service Provider (HSP) Network of installers
  • Largest installation contractor of cable services
    for Cablevision and Rogers
  • Superior quality and customer satisfaction
    ratings
  • Large and Growing End-Markets
  • DIRECTV subscriber base projected to grow at a
    7.7 CAGR from 15 million in 2005 to 22 million
    in 2010
  • Convergence of technology driving demand for
    Triple Play (voice, data and video) service
    installations for the cable industry
  • Strong upgrade trend from basic to digital cable
  • Growth of digital homes wired for sound,
    security, and data combined with historically
    strong housing starts (in 2006 over 60 of the
    two million new homes built will have an advanced
    structured wiring feature built into the basic
    specifications)
  • National Footprint/ Leverageable Network
  • Over 3,300 highly-skilled, highly-trained
    technicians completing approximately 2.5 million
    in-home visits per year
  • Highly leverageable branch network capable of
    supporting a multitude of home services (e.g.,
    security, data networking, home theater,
    communications)
  • 85 branch locations across the U.S. and in
    Ontario, Canada
  • Significant Operating Leverage Margin Expansion
    Opportunity
  • Recent investments in infrastructure, personnel,
    and equipment position the Company to realize
    benefits of significant growth opportunities
  • Centralized back-office and off-shore call center
    operations
  • Fleet of over 3,000 company-owned trucks
  • Additional margin expansion opportunities
    available through product and market synergies,
    further benefits of scale, the elimination of
    redundant corporate overhead and improved
    workers compensation insurance rates
  • Strong, Experienced Management Team

22
35
Fact Sheet As at September 30, 2006
  • Symbol NCT.U (TSX)
  • Shares 24.4 million basic
  • Debt
  • Long Term 39.9 million (includes current
    portion)
  • Convertible Debt 7.7 million
  • Capital Leases 29.6 million
  • Cash 0.5 million
  • Restricted Cash 14.5 million
  • Technicians 3,300
  • Branches 85
  • Website www.180connect.net

23
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