Mti Wireless Edge (LSE:MWE) — Results for the nine months ended 30 September 2021

0:00 Good morning, ladies and gentlemen, and welcome to the MTI WIRELESS EDGE LTD. Results for the Nine Month Ended 09/30/2021 Investor Presentation. Throughout this presentation, investors will be in listen only mode. Questions are encouraged and will be submitted anytime via the Q and A tab situated on the right hand corner of your screen. Simply type in your question and press send. The company may not be in a position to answer every question received during the meeting itself. However, the company will review all questions submitted today and publish responses where it is appropriate to do so. These will be available via

0:32 your investment company dashboard, and we'll notify you by email when it's ready for your review. I'd also like to remind you that this presentation is being recorded. Before we begin, I'd like to submit the following poll. And I'd now like to hand you over to CEO, Moni Borovitz. Good morning. Good morning, Alexander. Good morning, everyone, and thank you for joining the call today in which we will cover the nine months result for MTI WIRELESS. As a quick reminder, we are a technology company focused on a wireless RF and microwave communication. We operate via three divisions, the antenna division in which we develop, manufacture, and market antennas for both commercial and military use, the wireless water control and management system where we sell wireless controllers for large installation, full cities, large agriculture conglomerates.

1:29 We are using the Motorola hardware here and bring our own software to manage those. And the third division in the business is the distribution and professional services in which we represent about 40 companies from outside of Israel, bringing their technology to the Israeli market. As you can see at the right hand, the split between the division and the geographical split of the revenues of the company shows that we're a stabilized company. It's been quite similar for the last two years, and we are progressing well on all fronts of the business. If we look at 2021, at least for the first nine months, it seems like a good year for MTI, another good year. We were able to increase our revenues and grow faster in our profits year on year. This time, I would like to emphasize that this is the first year for several years that we grow in all segments of the business, so we are very happy with that.

2:29 We always tend to generate cash from the operating profits, and it's usually the same level of cash from operation and the operating profit. And this was the case this year as well. So we grew our cash balance, and we have a solid balance sheet. If I'll talk about the business itself, I think that the underlying growth based on the five g, the water management, and the increased defense budget bodes well for the future of the company. Looking a little bit more into the numbers themselves. So as you can see, we increased our revenue and all the profits all the way down to the earning per share. Again, our long term business model is that we should generate 15%, one-five percent operational profit from each additional dollar that we generate in revenue.

3:26 I'm happy to say that we are in the ballpark for that in the nine months. In the last quarter, as you can see, we had some mixed feeling and mixed progress on the gross margin level. It was mainly in the water management and the distribution divisions. It was caused because of shipment cost and some mix of products. And we believe that we will regain gross margins. And for sure, we will continue and grow the profits as we did so far. The balance sheet remained very strong with net cash of over $9,000,000 And again, as a conservative company looking for the long run, we use this cash to both pay the dividends and to look for acquisition.

4:17 I always say that we look for acquisition on a better safe than sorry mode. This is still the way we look at acquisition. I can say that now after nearly two years or even a half that we are in the COVID nineteen, we see everybody get more relaxed and more used to the new normal life, so we see better opportunities. And once we have ever anything to tell to the market, we will. Going into the business itself. So as you can see, our antenna division is a very strong, a very stabilized one, working globally, deployed a lot of antennas in the field. We do a military antenna, which is about 30% of the antenna business, starting from airborne antenna all the way down to submarine antenna.

5:09 And here in this business, we made a huge project progress in the last twelve months. We're able to penetrate to five new customers. It's a lot in the military business. Two of them we announced because they were large contracts, one in North Europe and one in Canada. The other are in Western Europe. So we are very happy with this penetration, and I think it bodes well to the technology that we were able to develop in the last several years. If you look at our frequency range, you see that it is very big. It is huge, actually. So it also give us the confidence on going forward. On the commercial side, I would like to highlight first RFID. If you remember, at the beginning of the COVID nineteen, this market almost vanished, but now it is back to its normality, and we are at the pre COVID nineteen levels of business. So it is growing for us very nicely.

6:04 This, together with the five g that I will elaborate on in a few minutes, became the majority of our commercial revenue in the antenna business. And as we see those two as the gross engines of the antenna division going forward, I think that we should expect nice growth in the entire antenna division going forward. Talking about five g, so this is the key growth opportunity in our antenna division. We continue to see good traction of business in this area. As the reminder, we are working with four of the key radio manufacturer in the world that have over 30% market share. We continue to work very closely with them. We do a lot of collaboration with them. We see them moving ahead with their programs.

6:52 Some are moving faster, some are moving slower. But overall, we see a good business traction, and this was the main reason for the growth of 30% year on year in this five g backhaul antenna. We also gained another new customer in this area, and we are also working on new solution and idea that will help us to gain even more customer. But, again, we have the key customers that we need, and we just need to see and wait for the market to be ready to adopt the solution. We will go with it. Moving to our wireless water management solution, our largest division, which is about 40% of the business. I think that the key issue is that now everybody understand that the global climate change requires a water management worldwide.

7:44 It does not matter where you are, and I will convince you in a few second about it. Again, a very stabilized company leading. You can see that we work worldwide. Lots of units installed, helping us to progress step by step. We add a lot of technologies into the solution that we offer to our customers. Some is the collaboration with third parties, some our own development. Just to give you some idea, we developed with a third party a satellite communication solution now. So if you are far in the field and there is no any communication alternative, you can go via satellite. We developed a two factor authentication in order to make sure that if you use your phone to monitor, it is cyber safe, and we are adding such and such a lot of technologies in order to continue and lead this market.

8:42 But at the end of the day, what really matter is that we save on water. And as you can see, the average water saving is quite significant. I'd like to remind you that in this business, we have a recurring revenue model that is responsible for about 20% of our revenue. This is from service and maintenance that we do. We do it today in Israel, in Australia, a little bit in South Africa and in Canada where we opened the office earlier this year. I can say that the Canadian office is operating very well. We were able to re sign the agreements, the service agreement in Israel with our two largest municipalities. So we are very happy with this progress as well.

9:28 We work in various three different areas in the water management, as you can see below. But I think that what combines them all is the need to save water, to save on power, and to get better yields from what you do. And this is what our system are enabling the end user to do. We see demand coming from all over, as I said. We now have good revenue out of Russia, and it was no market for us two years ago. And, of course, in France, with the tattoo tattoos application for the vineyard market, we continue to see developing very nice. In order to convince you what the world is suffering from, I think that those three pictures worth more than a thousand word.

10:18 You can see Lake Oroville in California three years ago, few months ago, and two months ago. It's a critical resource, and we should know how to preserve it. Going to our distribution business. Again, another very successful year with double digit revenue growth. It's continued to go to grow very well for us. We announced several weeks a strategic agreement with our key customer in this business. I think it bodes well for the future. I'd like to emphasize again here the consulting services that we give on the TETR balloon application. We spoke about it several time in the past. I'm happy to say that now a new project was initiated in Israel. It was just resumed few weeks ago.

11:07 So we have a good visibility for at least the next eighteen months, and it could lead to a very long service contract for us. So overall, I think we are experiencing a very good year here in MTI. I think that it will end as a good year as well. All of our growth engines are working. All of them are in key areas, whether it's the wireless communication for five g, water management, or the increased defense budget. So we think we are positioned very well for the future. And of course, we will continue to use the cash that we have on the balance sheet in order to look for M and A opportunities. And once we have updates, we will.

11:54 I would like to thank you for joining today and be happy to take any question you may have. Moni, thank you very much for the presentation. Ladies and gentlemen, please do continue to submit your questions using the Q and A tab situated in the top right hand corner of your screen. But just while Moni takes few moments to review those investor questions submitted already, I'd like to remind you that a recording of this presentation, along with a copy of the slides and the published Q and A can be accessed via your investor dashboard on the investment company platform. I'd also like to remind you that your feedback is important to the company. And immediately after the presentation has ended, you'll be redirected for your opportunity to provide feedback in order that the company can better understand your views and expectations. Money investors have submitted a number of questions during the presentation today. I just wondered if I can hand back to you to respond to those where it's appropriate to do so. Could I just ask you to read out the question and who it's from?

12:45 Yes, sure. Adrian asked, q four is normally a very good quarter for MTI. Do you expect that again this year? And if so, is there a reason for this seasonality? So first of all, it is true that usually q four is better, and we do expect it to continue. I don't see a real reason for seasonality because we are working worldwide. So some places, it's winter, the other, it's summer and vice versa. But this is a matter of fact, and I think that we should see another good quarter in the fourth quarter.

13:21 There is a question for Mark. The story is one of growth in multiple markets. However, Q3 'twenty one results are lower as in Q2 'twenty one and only just up on Q3 'twenty. When can we expect this growth opportunity to be reflected in the financial result? So I think we do. We compare ourselves year over year because of some seasonality. And as long as we can grow the revenue somewhere between 7% to 10% year on year and have a faster profitability growth. And then as I said, our goal is to have at least 15% growth in the additional dollar.

14:06 You should see it. I think that growing the earnings per share double digit year on year is something quite significant, and we are happy with the progress. And of course, there will be even faster progress when five gs will be really deployed. What are the biggest risk you see on your biz? Ask Peter. I think that we are very well diversified, so there is no one risk that can really jeopardize. Right now, my key concern is the shipment cost and the shipment timing. It's a worldwide issue, so we deal a lot with it. And another point of concern for me today is the strong Israeli currency, the Israeli shekel.

14:54 At the end of the day, most of us work out of here in Israel. We sell a new $1. So as long as the shekel is strong, this might hurt us a little bit.

15:11 Ask. Two question is coming in coming months, which area you see growth. As majority of revenue is still generated in Israel, how do you plan to diversify going forward? So first of all, we see a growth coming from all of the segments of the business, not only one of them. They are all growing. We are very happy with this growth. And going forward, it's important to understand that because about onethree of our revenue is from the distribution business, which is in Israel, at the end of the day, lots of what we sell is an indirect export because we sell to the high-tech industry here, to the defense industry here, and many of the components that we sell here end as part of a system outside of Israel. So indirectly, we sell a lot outside of Israel.

16:05 And I think that the pie that I've shown about the global distribution is quite stable over years, and it was good for us because we sell good in EMEA. We sell good in The Americas. We sell good in Asia. So all in all, we are pretty satisfied with this diversification.

16:27 Thank you, Moni. I think you've addressed all the questions that have come in so far. And, of course, companies will review any further questions submitted and published responses where it's appropriate to do so. Morning. Just potentially, if I could ask you for a few closing comments before I redirect these investors and also oh, there's another question that's come in that maybe you could answer before that. Peter asked, do you look to maximize your shekel earning of US dollar? What's your functional currency?

16:52 Please, it's US dollar. We are a US dollar based company. Alright. Thanks for that, Moni. Could I perhaps ask you for those closing comments before I redirect investors for the feedback? Thank you. Yes. Thank you once again for attending this presentation. We are a wireless company, stabilized but with good growth engine, profitable as well. The year is paying dividend, and our goal is to continue and grow the business and keep on doing that. Thanks again, Moni, for updating investors today. Could I please ask investors not to close the session as you'll now be automatically redirected for the opportunity to provide your feedback in order that the management team can better understand your views and expectations.

17:39 This will only take a few moments to complete however it's greatly valued by the company. On behalf of the management team of MTI WIRELESS EDGE LTD, we'd like to thank you for attending today's presentation. That now concludes today's session, and good morning to you all.