Transcript Document
Black Box Corporation 12th Annual Needham Growth Stock Conference January 14, 2010 Black Box Network Services • Forward-Looking Statements - Any forward-looking statements contained in this presentation are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and speak only as of the date of this presentation. You can identify these forward-looking statements by the fact that they use words such as "should," "anticipate," "estimate," "approximate," "expect," "target," "may," "will," "project," "intend," "plan," "believe" and other words of similar meaning and expression in connection with any discussion of future operating or financial performance. Forward-looking statements are inherently subject to a variety of risks and uncertainties that could cause actual results to differ materially from those projected. Risk factors are included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2009 and our other filings with the Securities and Exchange Commission (the “SEC”). We can give no assurance that any goal, plan or target set forth in forward-looking statements can be achieved and readers are cautioned not to place undue reliance on such statements, which speak only as of the date made. We undertake no obligation to release publicly any revisions to forward-looking statements as a result of future events or developments. • GAAP Reconciliation -This presentation also includes, as a supplement to United States Generally Accepted Accounting Principles (“GAAP”), certain non-GAAP financial measures. These non-GAAP financial measures exclude the impact of certain items and, therefore, have not been calculated in accordance with GAAP. Pursuant to the requirements of the SEC’s Regulation G, we provide in our SEC filings additional information regarding these nonGAAP financial measures, including a reconciliation of them to their most comparable GAAP financial measures, management’s explanations regarding the use and usefulness of non-GAAP financial measures and the limitations associated with the use of non-GAAP financial measures. The Company's non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP financial measurements, and should be read only in conjunction with the Company's consolidated financial statements prepared in accordance with GAAP. 2 Company Confidential Terry Blakemore President and CEO Company Highlights Black Box is the leading independent provider of major communications and infrastructure technologies A Robust Company • • • • • • 194 offices Worldwide 4,500+ team members 2,500+ technicians 175,000+ clients 4,000,000+ ports under maintenance Servicing over 85 of the Fortune 100 Financially Strong and Stable • • • • Public company (NASDAQ: BBOX) since 1994 $1 billion in annual revenue Double digit margins Positive cash flow for 32 consecutive years 4 Company Confidential Black Box Corporation Voice Communications Services Remote and on-site services to plan, design, install, monitor and manage voice and data communications systems Data Infrastructure Services Services to plan, design, install and maintain the underlying infrastructure for communications networks Hotline Networking Products Sales and support of networking products and refurbished phones and cards 5 Company Confidential Capabilities Voice Communications Solutions: 60% of revenue Traditional Telephony Voice over IP Remote Monitoring Unified Communications Network Security 6 Company Confidential Strategic Advantage: Our Communications Portfolio & Partners • Relationships around the globe • 500,000 ports on maintenance • Coverage: U.S. • • • • No. 1 channel partner in North America 700,000+ ports on maintenance Coverage: U.S., Canada Jan 2010 – Added New reseller territory (Australia, New Zealand, UK, France, Italy, Germany, Mexico) • • • • • • • No. 1 U.S. channel partner 25-year relationship 1M+ ports on maintenance Coverage: U.S. Leader in Pure IP Telephony 20,000 ports on maintenance Coverage: U.S., Canada, UK and Australia • • • • • • • Top 3 Channel Partner 25-year relationship 2M+ ports on maintenance Coverage: U.S., Canada, U.S. Federal Government – worldwide coverage New agreement announced November 20, 2009 as Silver Partner Status January 2010 moved to Platinum Partner status Coverage: U.S., Canada, Mexico 7 Company Confidential Market Share Enterprise Line Shipments, North America, 2008 Others, 22.5% Cisco, 23.5% Siemens, ~1.9% ShoreTel, 2.1% Toshiba, 3.7% Avaya, 15.2% Mitel, 7.5% NEC, 8.5% Nortel, 15.0% Source: Market Share: Enterprise Telephony Equipment, Worldwide, 2008 Gartner (March, 2009) 8 Company Confidential Capabilities Data Infrastructure Services: 19% of revenue Networking Structured Cabling Data Networking Data Centers Digital Signage, CATV & Video 9 Company Confidential Capabilities Hotline Products: 21% of revenue Cables KVM Cabinets & Racks Routers, Switches Custom Solutions 10 Company Confidential Worldwide Market Size Communications and networking products and services Voice Communications $50B Data Infrastructure 3B Hotline Products 7B Total Worldwide Market Source: Derived from data provided by Gartner and other industry analyses. $60B 11 Company Confidential Client Spotlight Our clients include: 12 Company Confidential Client Opportunity Our view of how our clients see the market today » Telcos vs. System Integrators vs. Manufacturers and Their Channel Partners – Confusing relationships – Overlap in services and responsibilities – Need a single point of contact » Increasingly Complex Communications Technology Requires Higher Degree of Specialization – Customers need a partner that can integrate multiple, complex technologies with business strategy – Customers need a partner with the flexibility to support, augment or entirely outsource communications resources • Black Box is uniquely positioned to work independently and as a single point-of-contact among telcos, systems integrators and manufacturers • Black Box’s team has the right mix of skills to support advanced communications at all stages of the communications lifecycle 13 Company Confidential Black Box Solution Promises made and kept to meet our customers’ needs Consultative Approach • Comprehensive portfolio • Vendor independent • Understands interoperability • Single point-of-contact • Planning for future development Technical Expertise • Breadth of knowledge • Single-source provider • 2,500+ certified technicians • 7 NOCs, 24/7 support • Keeping clients abreast of technology advancements Experience • 33 years of proven results • Entrusted to drive communications strategy • Strong leadership • Diverse and long-term customer base Black Box’s consultative approach, technical expertise and experience enable us to fill gaps in the operational and strategic communications needs of our customers – TODAY AND INTO THE FUTURE ! 14 Company Confidential Mike McAndrew Chief Financial Officer Well-Diversified Revenues Revenue by Industry Source: Derived from Company data and Company’s 2009 Form 10-K . 16 Company Confidential Well-Diversified Revenues Revenue by Geography Revenue by Client Size Source: Derived from Company data and Company’s 2009 Form 10-K . Revenue by Client Type 17 Company Confidential Revenue Visibility 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 6 month Backlog (in millions) $ 158 $ 196 $ 195 $ 194 $ 210 $ 207 Maintenance Revenue as a % of total Revenue 21% 23% 24% 23% 23% 21% Backlog represents expected revenue related to executed client purchase orders or contracts that are estimated to be complete within 180 days of quarter end. 18 Source: Derived from Company data and Company’s 2009 Form 10-K and 9/30/09 form 10Q. Company Confidential Solid Sustainable Margins 10.4% 12.0% 10.2% $1,016 $1,017 $1,000 10.3% 10.3% Revenue (M) $1,000 $800 $600 $721 9.5% 10.0% 8.0% 8.7% $535 $467 6.0% $400 4.0% $200 2.0% $- 0.0% 2005 2006 2007 2008 2009 6 Mos. 2010 Fiscal Year * See attached reconciliation Adjusted Operating Income Percentage * $1,200 Source: Derived from Company data and Company’s 2009 Form 10-K and 9/30/09 form 10Q. GAAP/Non-GAAP Reconciliation Operating income Non-cash reconciling items Amortization of intangible assets on acquisitions Asset write-up depreciation expense on acquisitions Cash reconciling items Employee severance and facility consolidation costs Acquisition integration costs Historical stock option granting practices investigation and related matters cost 409A expenses Other FY 2005 % of $ Rev. $ 43 8.1% FY 2006 % of $ Rev. $ 55 7.6% $ FY 2008 % of $ Rev. 85 8.3% $ FY 2009 % of $ Rev. 80 8.0% 1 4 10 7 11 2 2 3 2 2 5 5 - - - 2 9 - - 1 1 - 7 13 2.3% 56 10.4% Adjusted operating income $ Annual Revenue $ 535 - $ 18 2.5% 73 10.2% $ 721 $ 89 8.7% $ 1,016 20 $ - 4 - 20 2.0% 105 10.3% $ 1,017 2 1 1.5% 6 - 1 16 6 Mos. 2010 % of $ Rev. $ 30 6.4% 9 - 5 Total pre-tax reconciling items $ FY 2007 % of $ Rev. 73 7.2% $ 2 23 2.3% 103 10.3% $ 1,000 14 3.0% $ 44 9.5% $ 467 Source: Derived from Company data and Company’s 2009 Form 10-K and 6/30/09 form 10Q. Company Confidential Consistent Positive Cash Flow Cash flow from Operations (M) $90 $81 $80 $72 $70 $60 $52 $52 $50 $37 $40 $30 $30 $20 $10 $2005 2006 2007 2008 2009 6 Mos. 2010 Derived from Company data and Company’s Fiscal Year Source: 2009 Form 10-K and 9/30/09 form 10Q. 21 Company Confidential Balance Sheet Statistics 2005 2006 2007 2008 2009 6 mos. 2010 DSO Days 57 54 53 55 53 51 Inventory Turns 6.4 7.3 7.2 7.1 8.5 8.4 Capex (M) $3.5 $4.1 $5.9 $3.2 $2.2 $1.0 Capex as % of Rev. 0.7% 0.6% 0.6% 0.3% 0.2% 0.2% Headcount 3,371 3,295 4,581 4,313 4,542 4,335 Debt / Equity .3 to 1 .2 to 1 .4 to 1 .3 to 1 .4 to 1 .4 to 1 22 Source: Derived from Company data and Company’s 2009 Form 10-K and 9/30/09 form 10Q. Company Confidential Liquidity At September 30, 2009 • $24 million in cash • $350 million syndicated line of credit » $221M drawn down » Leverage ratio - 2.4, Covenant < 3.0 » Interest Coverage Ratio – 9.1, Covenant > 3.0 » Borrowing rate – LIBOR + .875% = 1.4% » Expires January 2013 23 Company Confidential Business Framework • Operating Margin Percentage » Flexible cost structure, revenue visibility • Operating Margin Dollar Growth » Contribution • DSO » Operating CF focus, balance sheet strength • Revenue Growth » Markets, clients, M&A 24 Company Confidential Black Box Network Services (BBOX) » Well-Diversified Revenues » Solid, Sustainable Margins » Consistent, Positive Cash Flow 25 Company Confidential NASDAQ: BBOX