Vistance Networks, Inc. · NASDAQ:VISN
Vistance Networks — CommScope Holding Company — Merger or Acquisition (November 2018)
39 slides from Vistance Networks's merger presentation, Nov 8, 2018
Slide 1: Accelerating CommScope's Vision to Shape the Communications Networks of the Future
+ Accelerating CommScope’s Vision to Shape the Communications Networks of the Future November 8, 2018 Eddie Edwards Bruce McClelland Alex Pease CommScope President ARRIS Chief Executive Officer CommScope Executive Vice and Chief Executive Officer President and Chief Financial Officer
Slide 2: Safe Harbor
Safe Harbor Caution Regarding Forward Looking Statements This presentation or any other oral or written statements made by us or on our behalf may include forward-looking statements that reflect the current views of CommScope Holding Company, Inc. (“CommScope,” “us,” “we” or “our”) or ARRIS Internat
Slide 3: Third Quarter 2018 Results and 4Q/FY18 Financial Outlook
Third Quarter 2018 Results and 4Q/FY18 Financial Outlook Eddie Edwards CommScope President and Chief Executive Officer
Slide 4: CommScope Q3 2018 Results
CommScope Q3 2018 Results Revenue Operating Income(1) Diluted Earnings Per Share (in millions) (in millions) 1.9% Adjusted(2) Adjusted(2) (1.4%) +7.3% $1,240 GAAP GAAP $1,129 $1,150 $165 $251 $0.68 $222 $132 $219 $0.55 $0.59 $125 $0.34 $0.33 $0.26 Q2 2018 Q3 2017 Q3 2018 Q2 2018 Q3 2017 Q3 2018 Q2 2
Slide 5: Outlook: Near-term pressure, long-term opportunity
Outlook: Near-term pressure, long-term opportunity Our results will be pressured …but our industry leading in the near-term by industry innovation positions CommScope to headwinds… capitalize on longer-term tailwinds Disappointing Q4 outlook and flattish 2019 Significant long-term growth opportunity
Slide 6: Accelerating CommScope's Vision to Shape the Communications Networks of the Future
+ Accelerating CommScope’s Vision to Shape the Communications Networks of the Future November 8, 2018 Eddie Edwards Bruce McClelland Alex Pease CommScope President ARRIS Chief Executive Officer CommScope Executive Vice and Chief Executive Officer President and Chief Financial Officer
Slide 7: Acquisition of ARRIS is the strategic next step for CommScope
Acquisition of ARRIS is the strategic next step for CommScope to drive growth and shareholder value creation Vision Growth Market assessment Acquisition strategy and diligence of ARRIS Transform networks with Grow in core markets Organic and inorganic Complementary efficient solutions that t
Slide 8: The combination is expected to accelerate CommScope's vision
The combination is expected to accelerate CommScope’s vision to shape the communications networks of the future COMPLEMENTARY ATTRACTIVE STRATEGIC FIT FINANCIAL BENEFITS SOLUTIONS FOOTPRINT ▪ Creates a combined growth and ▪ Strengthen CommScope’s ▪ Diversifies product lineup ▪ ~$1 billion cash flow
Slide 9: Transaction Summary
Transaction Summary CLEAR PATHWAY TO CONSIDERATION GOVERNANCE FINANCIAL IMPACT COMPLETION ▪ ARRIS shareholders to Frank Drendel to continue Expected annual cost Transaction expected to receive $31.75 per share in to serve as Chairman of savings of more than $150 close in the first half of an a
Slide 10: ARRIS: A global leader in communications and networking technology
: A global leader in communications and networking technology Company Overview Adjusted Direct Contribution and Net Sales • ARRIS, headquartered near Atlanta, Georgia is a global LTM (as of Sep 30, 2018) innovator enabling the gigabit generation with new Adjusted Direct Contribution(1) compelling co
Slide 11: Compelling strategic and financial benefits
Compelling strategic and financial benefits 1 Technology and market position to shape the future of wired and wireless communications and well-positioned to benefit from key industry trends 2 Unique set of complementary assets and capabilities that enable end-to-end communications infrastructure sol
Slide 12: Stronger platform and better positioned to capitalize on industry trends
Stronger platform and better positioned to capitalize 1 on industry trends Rise of integrated Changing network Mobility access Shifting business Roll out of 5G offerings architectures & everywhere models and FWA technology • Desire for end-to-end • Rapid advancements in • Driving convergence of • MS
Slide 13: Complementary capabilities position CommScope to deliver end-to-end communication solutions
Complementary capabilities position CommScope to New integrated product 2 offering enabled by combination deliver end-to-end communication solutions New use cases opened up by combination A B C D E Residential Venue Coverage and Wired and Wireless For E2E Private Network Connected Broadband Delivery
Slide 14: Enabling the world's largest customers in nearly every aspect of their communications networks
Enabling the world’s largest customers in nearly every 2 aspect of their communications networks Text - ARRIS solutions Text - CommScope solutions A B C E2E Venue Coverage and Capacity E2E Wired and Wireless for Macro, E2E Residential Broadband Delivery Solutions Metro, and Enterprise Applications C
Slide 15: CommScope gains strong footing in private networks
CommScope gains strong footing in private networks for 2 industrial, enterprise and public venue use cases Customers demand increasing Private LTE/5G Comprehensive end-to-end private network solution security and reliability for networks address enables customers to realize secure, low latency, high
Slide 16: Enhanced connected/smart home solutions value proposition
Enhanced connected/smart home solutions 2 value proposition ARRIS solutions CommScope solutions Components of comprehensive in-home connectivity solution Fixed wireless access (FWA) Multimedia In-home connectivity ▪ Network access technology for FWA ▪ Set top boxes ▪ Broadband gateway ▪ RAN infrastr
Slide 17: CPE – Large stable business: Connection to the home remains critical
CPE – Large stable business: 2 Connection to the home remains critical Global CPE PAM Projection(1) Key Points to Consider Video Broadband 1 Leading positions with key customers enabling cross- $20 Billion Industry CAGR (’18-’23) sell of non-CPE products -1% 2 Potential for incremental growth opport
Slide 18: Combination accelerates CommScope's vision to shape the communications networks of the future
Combination accelerates CommScope’s vision to shape the communications 3 networks of the future ~$1B ~15,000 cash flow from operations patents expected in 1st full year ~30,000 post-close employees serving customers in >150 countries ~$11.3B(1) revenue ~$800M ~$1.8B (1) average annual R&D adjusted E
Slide 19: Increasing penetration opportunities in a growing product addressable market
Increasing penetration opportunities in a growing product 3 addressable market Product Addressable Market (PAM) – $ Billions Today + >$60B >$35B(2) ~$25B(1) The combination will more than double CommScope’s PAM and unlock access to future high growth areas (1) CommScope estimates and industry report
Slide 20: Broad customer relationships across diverse end-markets
3 Broad customer relationships FINANCE across diverse end-markets Customers in more than 150 countries SATELLITE PROVIDERS CABLE PROVIDERS TELCO PROVIDERS HOSPITALITY RETAIL EDUCATION PROGRAMMERS FORTUNE 500 Opportunity to enhance strategic partnership and deliver enhanced capabilities to existing c
Slide 21: Successful track record of integrating strategic acquisitions
4 Successful track record of integrating strategic acquisitions 5G 2 0 0 7 – 2 0 1 7 Re v e n u e C A G R o f 9 % Digital Revolution Enhanced mobile broadband IoT Ultra-low latency Rise of Mobility Internet Explosion B A N D W I D T H D E M A N D 2004 2008 2011 2013 2015 2017 2020+ Cable ACQUISITION
Slide 22: Compelling financial rationale for CommScope
5 Compelling financial rationale for CommScope ~$1 billion(1) in expected cash flow generation and ability to quickly de-lever Estimated more than $150 million in annual run-rate cost synergies(2) Expected to be 30%+ accretive to underlying earnings in first full fiscal year Expands CommScope’s prod
Slide 23: Overview of pro forma combined company
5 Overview of pro forma combined company LTM (as of Sep 30, 2018) Pro Forma Pro Forma Profitability Breakdown(1,2) (LTM 9/30/18) $11.3B $6.7B Mobility Revenue Solutions $4.6B Connectivity Solutions $1.8B Adj. EBITDA(1) $850M Customer Premise excl. synergies $935M Equipment $822M Enterprise(3) R&D Sp
Slide 24: CommScope's proven track record of successfully de-levering in previous transactions
CommScope’s proven track record of successfully de-levering 5 in previous transactions Net Leverage Andrew Acquisition LBO BNS Acquisition ARRIS Acquisition(2) 5.1x 5.0x 5.0x 4.2x 3.9x(1) ~4.0x 2.3x 2.0x-3.0x 1.1x 2007 2010 2011 2014 2015 2018 Closing 2 Years Post-Close Long-term Target Target CommS
Slide 25: Expect to reach annual run-rate of at least $150 million in cost synergies
Expect to reach annual run-rate of at least $150 million(1) in cost 5 synergies in the third year following transaction close Cost Synergies SG&A ~25% ▪ Economies of scale through global shared services, consolidation of redundant functional support and real estate footprint consolidation $150M+ Cos
Slide 26: Premier Equity Sponsorship: Carlyle
5 Premier Equity Sponsorship: Carlyle is one of the world’s largest private equity firms with deep technology and communications industry experience ⁻ ~$212 billion of assets under management ⁻ ~$27 billion of equity invested in the technology, media, and telecom sector since inception Took Comm
Slide 27: Financing overview and pro forma net leverage
5 Financing overview and pro forma net leverage • CommScope has secured full commitments from J.P. Morgan, Bank of America and Deutsche Bank to finance the transaction. The company expects to use ~$0.9 billion in combined cash on balance sheet , ~$5.3 billion of new secured debt, ~$1.0 billion of se
Slide 28: Transaction delivers benefits for all stakeholders
Transaction delivers benefits for all stakeholders Customers Employees Investors Partners ▪ Access to complementary ▪ Greater mobility, skill Expect to unlock value ▪ Access to the integrated and end-to-end development, and through future growth leader in the communications opportunities for oppor
Slide 29: Appendix: Non-GAAP Financial Measures
Appendix Non-GAAP Financial Measures CommScope and ARRIS management believes that presenting certain non-GAAP financial measures provides meaningful information to investors in understanding operating results and may enhance investors' ability to analyze financial and business trends. Non-GAAP measu
Slide 30: Statements of Operations
Statements Thre e Months Ende d Nine Months Ende d of Operations Se pte mbe r 30, Se pte mbe r 30, 2018 2017 2018 2017 Net sales $ 1,150,405 $ 1,128,775 $ 3,510,778 $ 3,440,150 Operating costs and expenses: Cost of sales 726,531 700,170 2,204,194 2,085,973 Selling, general and administrative 173,990
Slide 31: Balance Sheets
Balance Sheets Se pte mbe r 30, 2018 De ce mbe r 31, 2017 Assets Cash and cash equivalents $ 352,397 $ 453,977 Accounts receivable, less allowance for doubtful accounts of $18,141 and $13,976, respectively 901,096 898,829 Inventories, net 490,767 444,941 Prepaid expenses and other current assets 123
Slide 32: Statements of Cash Flows
Statements of Thre e Months Ende d Nine Months Ende d Se pte mbe r 30, Se pte mbe r 30, 2018 2017 2018 2017 Operating Activities: Cash Flows Net income $ 63,843 $ 51,157 $ 163,500 $ 140,183 Adjustments to reconcile net income to net cash generated by operating activities: Depreciation and amortizati
Slide 33: Sales by Region
Sales by Region (Unaudited -- In millions) % Change Q3 2018 Q3 2017 YOY United States $ 653.0 $ 595.3 9.7 % Europe, Middle East and Africa 235.6 231.0 2.0 Asia Pacific 179.3 218.6 (18.0) Caribbean and Latin America 59.4 62.2 (4.5) Canada 23.1 21.7 6.5 Total Net Sales $ 1,150.4 $ 1,128.8 1.9 % 33
Slide 34: Segment Information
Segment Information (Unaudited -- In millions) Sales by Segment % Change Q3 2018 Q2 2018 Q3 2017 S equential YOY Connectivity Solutions $ 731.7 $ 740.5 $ 708.7 (1.2) % 3.2 % Mobility Solutions 418.7 499.4 420.1 (16.2) % (0.3) % Total Net Sales $ 1,150.4 $ 1,239.9 $ 1,128.8 (7.2) % 1.9 % Non-GAAP Adj
Slide 35: ARRIS Segment Information
ARRIS ARRIS International plc Reconciliation of GAAP Operating Income (Loss) to Non-GAAP Adjusted Direct Contribution (Unaudited -- In millions) Segment Third Quarter 2018 Non-GAAP Adjusted Direct Contribution Reconciliation by Segment Corporate & CPE N&C Enterprise Unallocated Total Information Ope
Slide 36: CommScope and ARRIS: Adjusted EBITDA Reconciliation
CommScope and ARRIS: Q3 2018 Q2 2018 Q1 2018 Q4 2017 Q3 2017 Operating income, as reported $ 132.2 $ 164.7 $ 103.7 $ 90.3 $ 125.4 Amortization of purchased intangible assets 65.8 66.4 67.2 68.1 68.3 Adjusted Restructuring costs, net 7.1 7.2 5.5 19.3 5.4 Equity-based compensation 11.3 11.8 10.5 10.3
Slide 37: Quarterly Adjusted Operating Income Reconciliation by Segment
Quarterly Third Quarter 2018 Non-GAAP Adjusted Operating Income Reconciliation by Segment Adjusted Connectivity Mobility S olutions S olutions Total Operating income, as reported $ 94.9 $ 37.3 $ 132.2 Operating Amortization of purchased intangible assets 44.4 21.4 65.8 Restructuring costs, net (0.4)
Slide 38: Adjusted Net Income Reconciliation
Adjusted Net Three Months Ended Nine Months Ended Income S eptember 30, S eptember 30, 2018 2017 2018 2017 Operating income, as reported $ 132.2 $ 125.4 $ 400.6 $ 381.8 Reconciliation Adjustments: Amortization of purchased intangible assets 65.8 68.3 199.5 202.9 Restructuring costs, net 7.1 5.4 19.7
Slide 39: Outlook GAAP to Non-GAAP Reconciliation
Outlook GAAP to Non-GAAP Outlook Three Months Ended Reconciliation December 31, Full Year 2018 2018 Operating income $ 60 - $83 $ 461 - $484 Adjustments: (Unaudited -- In millions) Amortization of purchased intangible assets $ 66 $ 265 Equity-based compensation $ 12 $ 46 Restructuring costs, integra
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