AMBERTECH LIMITED — Interim / Quarterly Report 2023

Feb 20, 2023

1[ST] HALF RESULTS FY 2023 INVESTOR UPDATE - FEBRUARY 2023

ASX: AMO

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1[st] Half Highlights

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Revenue EBITDA NPAT EPS DPS $40.5m $2.0m $0.7m 0.8c 0.5c Revenue growth of 5.8% on previous corresponding period. EPS of 0.8 cents. First half results in line with market guidance. Working Capital remains strong Interim dividend of 0.5 cents, fully franked Ongoing dividend payout commitment

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Executive Summary

• Leading value-added distributor of high technology audio-visual (AV) and communications solutions.

• Distribution network of professional, commercial and residential installers, consumer electronics (CE) & musical instrument (MI) retailers, content creators, broadcasters, government and non-government users of communications infrastructure across Australia and NZ.

• Continuing success driven by of the adoption of AV technology accelerated by COVID-19 across its key markets.

• Delivering on clear strategy for growth via business and agency acquisition.

• Recent successful acquisition and integration of Hills AV business (Nov 19), Noise Toys Imports MI business (Sep 21) and Connected Media Australia (Oct 21).

• Recent acquisition of Convoy International business (Jan 23) to broaden product offering to specialist AV retailers and residential installer markets.

Structure

Capital Structure
Share price ( 17 February 2023)	$0.315
52 week range	$0.265/$0.415
Shares on Issue	93.1M
Options on Issue	1.3M
Market capitalisation	$28.9M
Net debt (31 December 2022)	$2.6M
Enterprise Value	$31.5M
Substantial Shareholders(17 February 23)	%
Appwam Pty Limited	29.8%
Wavelink Systems	7.8%
Amos Super Fund	5.6%
Sub-total	43.2%
Top 20	70.3%

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Dividends

• Interim dividend 0.5 cents per share

• DRP suspended for interim dividend

• Dividend payout ratio of 64% of NPAT

Dividend Cents per Share

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Interim FY21 1.5
Final FY21 1.6
Interim FY22 1.5
Final FY22 1.5
Interim FY23 0.5
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• Board target payout ratio of min 50% of NPAT

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Business Segments

Integrated Solutions

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Supporting our dealer network with world class product solutions and support.
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$0.5m to
$22.4m 55%
$2.0m
- Acquisition provides additional scale
and allows for the creation of a new
dedicated Specialist HiFi sales team.
Key Brands Strategic Acquisitions
- Australian Monitor - Sonance – Williams AV - RTI - Bluesound - NAD - Aver – Grandview - Newline - Hills AV (Nov ‘19) - Connected Media Australia (Oct ‘21) – Convoy International (Jan ‘23)
Revenue 1H FY23 Of total revenue` Typical contract size
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Key Customers

• One Diversified - Fredon Technology - Programmed Electrical - Vizcom Technologies - Electronic Living - AV Australia - Concept AV - Pro AV Solutions - Melbourne HiFi – Harvey Norman Commercial

Professional Business Segments

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Supporting a strong dealer network and a range of media and communications users with world class product solutions and ongoing support including SaaS.

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Key Brands

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$1.0m to
$12.0m 30%
$12.0m
Strategic Acquisitions
Revenue 1H FY23 Of total revenue` Typical contract size
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- EVS –Telestream - Avid – Solid State Logic – Silvus – Neutrik – Canare – Radial - Strymon – Warwick Guitars
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- Noise Toys (Sep ‘21)
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Key Customers

• Department of Defence – Royal Australian Navy - ABC – Fox Sports – Seven Network – Nine Network – Network Ten - Soundbay – Factory Sound – Sounds Easy

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Retail
Business Segments
Exclusive brand representation in areas where product differentiation is clear in capability and value.
$6.1m 15%
Key Brands
- One For All – Philips – Nura
Key Customers
- JB HiFi – Harvey Norman – Big W – The Good Guys – The Warehouse – Noel Leeming – Electus Distribution
Revenue 1H FY23 Of total revenue`
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		Integrated Solutions Professional Retail
	Market Opportunity	 Streaming audio/video  Home entertainment  Commercial AV  Automation control  Communications IP radio  Automation of TV, Post-Production  Music Production  Demand for small portable projection  Requirement for portable sound
	Key Products	 Streaming technologies  Supporting technologies (speakers, displays)  Amplifiers and speakers  Higher spec systems  MIMO mesh radios  Studio robotics  USB based audio interfaces  Studio monitor systems  Musical instruments and components  Personal projectors from lost cost and size (micro) to higher cost and size  Headphones with technology point of difference
	Competitors	 More competitors in this segment  Larger market  Limited competition  Specialist markets  Low cost no name brands

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Financials

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Financial Highlights

Commentary

• Underlying business growing, delayed project timelines now easing.

• Stock availability had impact on margins. This issue has now receded.

• Capacity for further organic and acquisition growth across all segments.

• Reduced result primarily in Retail segment (stock availability) and Media Systems (project delays).

Normalised NPBT by Half Year ($m)

Normalised NPBT

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2.5
2.3 2.3
2.0
2.1
2.0
1.5
1.0 1.2
0.5
-
1H F2021 2H F2021 1H F2022 2H F2022 1H F2023
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(A$m) 1H FY23 1H FY22
Revenue 40.5 38.3
Cost of Goods (26.4) (24.6)
Gross Profit 14.1 13.7
GP Margin (%) 34.8% 35.7%
EBITDA 2.0 4.1
EBITDA Margin (%) 4.9% 10.7%
EBIT 1.5 3.5
EBIT Margin (%) 3.7% 9.1%
NPAT 0.7 2.1
EPS (cents) 0.8 2.6
DPS (cents) 0.5 1.5
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• Investors undertaking a comparison of results should take into account $0.8m in Covid support payments received in the comparative period.

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Balance Sheet

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Balance Sheet Summary

(A$m)	1H FY23	FY22			(A$m)	(A$m)	1H FY22	FY22
Current Assets	43.5	35.1			Inventory		17.2	15.6
						115% 119% 172% 182% 136% FY19 FY20 FY21 FY22 1H FY23 Annualised GPROI (Average Inventory)
Current Liabilities	23.5	14.4
Working Capital	20.0	20.7
Adjusted Working Capital (excluding cash)	18.0	18.5
Non Current Assets	8.9	9.4
Non Current Liabilities	7.2	7.9
Net Assets	21.7	22.2
Intangibles	(4.1)	(4.3)
Net Tangible Assets	17.6	17.9

• Working capital and NTA steady during the period, with second half growth expected.

• Significant stock arrivals late December due to late deliveries and upcoming project requirements.

• Expect improved numbers in second half of the year.

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Cash Flow and Net Debt

Cash Flow Summary

(A$m)	1H FY23	1H FY22
Cash provided by Operating Activities	(1.5)	0.8
Cash used in Investing Activities	(0.3)	(1.9)
Cash provided by Financing Activities	1.6	1.3
Net increase in cash	(0.2)	0.2
(A$m)	1H FY23	FY22
Total Finance Debt	(4.6)	(1.2)
Cash	2.0	2.2
Net Cash/(Debt)	(2.6)	1.0

• Usage of Octet facility higher at balance date to manage inventory flows, including project deliveries.

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Net Cash/(Debt) ($m)

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2.0
1.0
1.0
-
FY19 FY20 FY21 FY22 1H FY23
(1.0)
(0.9)
(2.0)
(3.0) (2.6)
(4.0)
(3.8)
(4.4)
(5.0)
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• Temporary increase in inventory levels increased usage of debt facilities at balance date.

• Finance debt usage now peaked, should return below $2.0m by end of FY23.

• Significant headroom remains available across funding facilities.

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Growth Strategy and Outlook

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Executing Growth Strategy

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• Ambertech has a strategy for revenue and margin growth across each of our market segments. These include the following key initiatives:

• Expanded our reach into more system sales where we take the role of a complete supplier. Recent examples being the ABC project and Ausbiz.

• Professional  Focused on increasing our recurring services model where multi year support contracts are entered into. Network 10 a good example.

• Increasing sales by further developing existing brand opportunities. In particular, video conferencing and streaming products have significant ongoing growth potential due to the high demand resulting from the work force working from

• Integrated home.

• Solutions  Increasing our own IP capability with the acquisition of Australian Monitor. The R&D for new product development has seen the successful release of new products. Expanding international presence.

• Further market expansion of our range of low cost LED based projectors.

• Retail  Introduction of personalised Headphone brand Nura.

Acquisition

• Completed the acquisition of the business of Convoy International – a strategic development of a key relationship with Lenbrook International (NAD, Bluesound). Provides additional scale in the residential and specialist Hi-fi markets.

• Ongoing assessment of further acquisitions, with a number already identified in each area of the business.  We have a disciplined framework for approaching relevant acquisition opportunities.

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2H FY23 Outlook

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• Interim Dividend of 0.5 cents per share fully franked. Represents pay out ratio of 64% of NPAT.

• Strong start to second half and Board has confirmed its intention to target a dividend pay-out ratio of at least 50% for the full year.

• The challenges of timely product supply during the first half are receding and stock arrivals in late December are now providing stronger margins and a continuation of the revenue growth achieved in the first half of the year.

• Project milestones now beginning to see delivery and revenue recognition.

• Opportunities for growth via acquisition continue to emerge and we are active in this space. Consolidation of Convoy International acquisition is a focus for the second half.

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Appendix

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Acquisition Summary – Convoy International

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Summary

• Acquisition completed 31 January 2023.

• Purchase price circa $2.8m (subject to final adjustments) funding from existing cash reserves.

• Annualized revenue of $4.5m with significant growth opportunity due to Amber’s wider reach across the residential installer base.

About Convoy International

• Established in 1965 as a leading importer, distributor and marketer of a wide range of:

  • High-fidelity loudspeakers

  • Amplifiers

  • Media players

  • • Headphones

  • Speakers for personal audio devices

  • Advanced home audio components

  • Audio-video digital accessories

• Strategic relationship with Canadian manufacturer Lenbrook Industries.

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Recent Contract Wins and Agency Gains

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		New Agencies
Projects		During the year:
	Awarded a major, multi year contract with Network Ten to replace news and	Breedlove Guitars
	production systems. Revenue in the order of $12m over 5 years with $1.3M due in	Kasta Technologies
	the second half of FY2023.	James Tyler Guitars
		LEA Professional
	Major law enforcement agency contract for $2.2M.	NAD
	Several upgrades with national broadcasters.	Bluesound
		ISO Acoustics
		Acquisition
		Convoy International (Jan ‘23)

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Important Notice and Disclaimer

Future performance

This Presentation contains certain “forward looking statements”. Forward looking statements can generally be identified by the use of forward looking words such as, “expect”, “anticipate”, “likely”, “intend”, “should”, “could”, “may”, “predict”, “plan”, “propose”, “will”, “believe”, “forecast”, “estimate”, “target” “outlook”, “guidance” and other similar expressions within the meaning of securities laws of applicable jurisdictions and include, but are not limited to, indications of, or guidance or outlook on, future earnings or financial position or performance of Ambertech, the outcome and effects of the Offer and the use of proceeds, including the impact of the acquisition. The forward looking statements contained in this Presentation are not guarantees or predictions of future performance and involve known and unknown risks and uncertainties and other factors, many of which are beyond the control of Ambertech, and may involve significant elements of subjective judgement and assumptions as to future events which may or may not be correct. Refer to the risks section of this Presentation for a summary of certain general and Ambertech specific risk factors that may affect Ambertech. There can be no assurance that actual outcomes will not differ materially from these forward-looking statements. A number of important factors could cause actual results or performance to differ materially from the forward looking statements, including the risk factors set out in this Presentation. Investors should consider the forward looking statements contained in this Presentation in light of those disclosures. The forward looking statements are based on information available to Ambertech as at the date of this Presentation. Except as required by law or regulation (including the ASX Listing Rules), Ambertech undertakes no obligation to provide any additional or updated information whether as a result of new information, future events or results or otherwise. Indications of, and guidance or outlook on, future earnings or financial position or performance are also forward looking statements.

Effect of rounding

A number of figures, amounts, percentages, estimates, calculations of value and fractions in this Presentation are subject to the effect of rounding. Accordingly, the actual calculation of these figures may differ from the figures set out in this Presentation.

Investment risk

An investment in New Shares is subject to investment and other known and unknown risks, some of which are beyond the control of Ambertech including possible loss of income and principal invested. Ambertech does not guarantee any particular rate of return or the performance of Ambertech, nor does it guarantee the repayment of capital from Ambertech or any particular tax treatment. In considering an investment in Ambertech shares, investors should have regard to (amongst other things) the risks outlined in this Presentation.

Disclaimer

To the maximum extent permitted by law, no representation or warranty, express or implied, is made as to the currency, accuracy, reliability or completeness of information in this Presentation and each of Ambertech and their respective advisers, affiliates, related bodies corporate, directors, officers, partners, employees and agents excludes and disclaims all liability, including without limitation for negligence or for any expenses, losses, damages or costs incurred by you as a result of your participation in the Offer and the information in this Presentation being inaccurate or incomplete in any way for any reason, whether by negligence or otherwise. Ambertech, the lead manager and their advisors make no recommendations as to whether investors or their related parties should participate in the Offer. Statements made in this Presentation are made only as at the date of this Presentation. The information in this Presentation remains subject to change without notice. Ambertech reserves the right to withdraw the Offer or vary the timetable for the Offer without notice.