Altigen Communications Investor Presentation Presented by: Jeremiah Fleming, President & CEO ATGN
Altigen Communications Overview Provider of Unified Communications as a Service (UCaaS) Solutions based on the Microsoft Platform • Headquartered in Silicon Valley, California • In Business for 20+ Years • More than 2,500 Current Customers FY18 Financials Employee Distribution Stock Ownership CEO, Support: $10.002 15% 9 Management, 12% Engineering: Employees, Private Investors, SG&A: 27 $3.080 67% 6% 19 $1.148 Revenue Net Income Cash Confidential - Not for Distribution
Summary Financials Category 9M FY19 FY18 FY17 FY16 FY15 Revenues $7,970 $10,002 $8,388 $8,431 $9,800 Cost of Revenues $1,455 $1,645 $1,270 $1,451 $1,928 Gross Margin 82% 84% 85% 83% 80% Operating $4,921 $7,208 $6,729 $7,812 $7,218 Expenses EBITDA $1,792 $1,822 $545 $55 $1,325 Net Income $1,627 $9,840 $379 $(835) $644 Net Cash $4,614 $3,080 $3,876 $4,490 $4,560 *Adjusted EBITDA is a non-GAAP measure that adds back non-cash expenses and one-time, non-recurring expenses Net Operating Loss Carryforward: Research & Development Tax Credits: • Federal: $52.6M* • Federal: $1.1M* • State: $22.7M* • State: :$700K *expire at various dates through 2038 Confidential - Not for Distribution
Cloud PBX Business Model Driving Current Growth On Premise => Cloud Glossary of Terms On Premise: Installed at a Customer Location Cloud : Hosted in Altigen’s Datacenter SIP Trunks: Internet-based Phone Service The “Old” Altigen Revenue Model The “New” Altigen Revenue Model PBX: Private Branch Exchange (Phone System) • One-time, On Premises Sales • Cloud & Monthly Recurring Revenue Contact Center: Designated group of people • All Software PBX at the Core, but • Complete, All Software Solution whose job is to take Inbound Customer Calls • Hardware Revenue > 90% • $0 Hardware Revenue • No Recurring Revenue • 50%+ Cloud / 90% Total Recurring Revenue • Phone Service Not Included • Plus Monthly Recurring SIP Revenue Confidential - Not for Distribution
Altigen’s Cloud Business Strategy – Phase 1 Leveraging a Captive Audience - Current Customers Migrate On Premises PBX to the Cloud MaxCS IP PBX – Targeting SMB Market (10 to 100 employees) Max axCS CS • 3 Unique Delivery Models: Max axCS CS • Hosted by ATGN SIP Trunks IP PBX • Hosted by ATS: $18M Managed Services Provider Max axCS CS • Hosted by Fiserv: $18B Financial Services Technology Provider & IVR & Provider Current Cloud Customers Target Audience / Untapped Opportunity 280+ Customers 1,750+ Customers 9,000+ Subscribers 80,000+ total users 250+ Customers 3,000 Customers using Integrated CRM 7,200+ Subscribers 50,000 total users 20+ PBX Customers 13,000 Customers using Fiserv Core 1,700+ PBX Subscribers 500,000+ total users 2,500+ IVR Customers Confidential - Not for Distribution
Microsoft Teams Market Opportunity Overview Teams Market Opportunity • Fastest Growing App in MSFT History • Included in all O365 Enterprise Plans • 155M+ Commercial O365 Users • 80M+ SfB Online Users => Teams • Teams Phone System is the only Solution that Integrates with Office 365 • Superior Price Points vs All Competition • Large Global Microsoft Partner Channel Confidential - Not for Distribution
UCaaS Competitive Landscape Altigen Opportunity • Microsoft is the leading UCaaS Provider • Teams Phone System is the Beachhead • Altigen Solutions Address “Completeness of Vision” • Target Microsoft O365 Customers and Partners • Leverage Altigen Microsoft Communications Expertise • Add Critical Enterprise Communications Capabilities to Teams Phone System • Enable Organizations to Replace their PBX Systems • Deployment and Support Services Facilitate Customer and Partner Migration to Teams Phone System Confidential - Not for Distribution Confidential - Not for Distribution
Altigen’s Cloud Business Strategy – Phase 2 Leveraging Microsoft - New Customer Acquisitions Integrate Altigen Applications with Microsoft UC Altigen Contact Center Solutions and SIP Trunk Service • Target the MSE Market (100 to 1,000 employees) Max axCS SIP Trunks Appli licat ations • Hosted by Altigen, Integrated with Microsoft Platform Current Cloud Customers Target Audience / Untapped Opportunity 20+ Customers ~2,500 On Premises Skype for Business Customers 2,000+ Subscribers ~125,000+ total users 10+ Customers ~10,000 Teams Customers (and growing) 1,000+ Subscribers ~500,000 total users Confidential - Not for Distribution
Altigen’s Cloud Business Strategy – Phase 3 Enhancing Microsoft Teams – High Growth Opportunity Confidential - Not for Distribution
Cloud Business Model Revenue Growth Total Company Revenue by Category FY15 – FY18 10000 9000 8000 7000 6000 5000 4000 3000 2000 1000 0 FY15 FY16 FY17 FY18 Cloud SA Software + Services Hardware Confidential - Not for Distribution
Cloud Subscriber Revenue by Category Total Cloud Revenue by Category FY15 – FY18 6000 Skype for Business / Teams 5000 Hosted MaxCS SIP 4000 3000 2000 1000 0 Cloud Metrics FY15 FY16 FY17 FY18 # of Customers 156 302 434 576 Avg Revenue per Customer $ 428 $480 $586 $683 # of Subscribers 5,810 8,333 13,828 18,799 Avg Revenue per Subscriber $ 17.06 $17.41 $19.32 $20.92 Confidential - Not for Distribution
Historical Cloud Performance Metrics Based on FY18 Results Gross Churn Rate Lifetime Value LTV to CAC Ratio 4.5% $3,905 15.7 GCR = Revenue Churn / LTV = ARR x LTV / CAC (Beginning ARR + Ending ARR)/2 (Cloud Gross Margin / GCR) Peer Comparison Company EV / LTM Sales Cloud Growth Rate RingCentral 13.3x 33% 8x8 6.2x 18% Five9 10.9x 27% Average 10.1x 26% Altigen 2.2x 28% Confidential - Not for Distribution
Altigen Business Strategy Summary Key Strategies: • Continue Monetization of Altigen’s on Premises Customer Base (i.e., Cloud Conversion) • Emphasis on Vertical Market Solution Providers to Differentiate Altigen Solutions • Focus on Microsoft Teams (Office 365) to Drive UCaaS Growth (Direct and Channel) • Target Global Service Providers with New Teams Solutions • Execute on our Capital Allocation Framework Confidential - Not for Distribution
Thank You! Contact Us United States United Kingdom 670 N McCarthy Blvd 11-21 Paul Street Milpitas, CA 95035 London, EC24 4JU +1 408.597.9000 +44 (0) 1582 287613 www.altigen.com IR@altigen.com
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