COMPUMEDICS LIMITED — Investor Presentation 2015

Apr 28, 2015

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May, 2015
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Compumedics Limited Corporate Presentation – February 2015

1

Investor Overview

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• Core business: returned to growth.

• Neurology growth opportunity: New market for CMP. We have the leading brain source localisation software.

• Asian EEG - largest segment of $886.8 m brain monitoring device market

• Asian EEG - 2013 $81.8m PA to 2018 $133.0m by 2018, CAGR: 10.40% (1)

• Trend towards Home Sleep Testing (HST) - CMP well positioned – growing market (2)(3)

• eHealth: Moving Compumedics’ proprietary technology to the cloud. $10m of contracts already won.

• Spin offs/strategic decisions to unlock significant value for shareholders

• FY15 guidance: $33m sales, revenue growth >10%, EBITDA $3.5-4m, NPAT $1.8-$2m.

2

(1) RFM:15215; (2) RFM: 15218; (3) RFM: 15214

Who is Compumedics?

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• Compumedics is a leading global, innovative developer and manufacturer of medical devices for:

• Diagnosing sleep disorders

• Monitoring neurological disorders including long-term epilepsy monitoring (LTEM)

• Highly sophisticated brain research

• Ultrasonic monitoring of blood flow through the brain (Transcranial Doppler [TCD])

• Compumedics is a technological leader in its chosen markets:

• 1 Australia sleep & neuro diagnostics device supplier

• 1Japan sleep diagnostics device supplier

• 1 China sleep diagnostic device supplier to China’s premier facilities & #1 TCD device supplier

• 3 USA sleep diagnostic device supplier and emerging #3 supplier for neurological monitoring devices

• Compumedics has a rich intellectual property portfolio

• Compumedics e-Health platform is the next growth phase in the company’s development

• Compumedics listed ASX Dec 21, 2000

3

Directors & Executive Team Key Management

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David Burton, Ph.D. Executive Chairman, CEO Founder, Tenure 26yrs

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NED Mr. David Lawson Mr. Alan Anderson Chief Financial Officer & Leading USA Attorney Company Secretary CMP Tenure : 11 yrs CMP Tenure 13 yrs

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Mr. Warwick Freeman Kerry Hubick, Ph.D . Chief Technology Officer Trademark, Patent & CMP Tenure 15 yrs General Legal Attorney CMP Tenure 7 yrs

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Mr. Christoph Witte General Managing Director Compumedics Germany GmbH CMP/DWL Tenure 24 yrs

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4

A Tradition of Innovation

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Comperio DQ Summit IP
SynAmps2 2004 2005
Somté 2003
2001 Siesta 802
Siesta
2005
2000
P Series
1994
S Series
1987
Somté PSG
2006
Neuvo LTM
SynAmpsRT 2007
2008
CURRY6
Somnilink SPAP 2009
2010
Grael HD
Somfit
2010
2015 Somté PSG 2.0
2011
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5

Established Client Profile

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6

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Core Sleep and Brain Diagnostic Monitoring Business

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7

Core Business Overview

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• Core business has now recovered post GFC and high AUD

• We continue to transition product manufacturing and assembly offshore, which will result in reducing the cost of manufacturing to between 1/3 and 1/2 while maintaining premium functionality

• We have traditionally targeted the premium end of the market, which was hit hard by the GFC. We can now target the mass market.

• CMP will be a market disruptor for the first time in its history

• 20,000 installed systems worldwide. Strong brand name and reputation.

• Expecting average sales growth >10% pa

Product Matrix

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Product		Used for	Bought by	Average selling price
Grael		Sleep and neurology	Hospitals, doctors and service providers	USD17,500
Somte PSG		Sleep	Hospitals, doctors and service providers	USD10,000
Siesta		Sleep and neurology	Hospitals, doctors and service providers	USD18,000
Neuvo LTM		Neurology	Hospitals, doctors and service providers	USD35,000
Synamps RT		Brain Research	Universities and teaching hospitals	USD38,000
CURRY		Brain research and neurology	Universities, teaching hospitals and regular hospitals	USD20,000

9

Revenue Composition at ≈$15.6m 31 December 2014

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By geographic region

By product/market

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Europe,
USA,
18%
32%
Asia,
33%
Aust,
17%
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Tech.
Supply Service,
Items, 9%
Sleep,
11%
32%
Brain
Blood Neuro,
Flow, Brain 11%
20% Res,
17%
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Software upgrades 5 to 10% of system sales

Compumedics sells directly to end-user customers in Australia, USA and Germany and through its network of more than 50 distributors to all other parts of the world

10

Historical First Half Revenues 6 months to 31 December

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0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0	Shipped and invoiced
	H1 FY13 H1 FY14 H1 FY15 F'cast H2 FY15 H1 Rev F'Cast Rev

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Historical First-Half Earnings 6 months to 31 December

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NPAT

EBITDA

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1
0.8
0.6
0.4
0.2
0
H1 FY13 H1 FY14 H1 FY15 H2 Fcast
-0.2
FY15
-0.4
-0.6
-0.8
-1
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NPAT F'Cast NPAT
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2
1.8
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0
H1 FY13 H1 FY14 H1 FY15 H2 Fcast
FY15
EBITDA F'Cast EBITDA
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Employee Composition at ≈130 staff 31 December 2014

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By geographic region

By function

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Asia, Mid
2% East,
1%
Europe, USA,
24% 32%
Aust,
41%
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Admin
Sales &
Quality,
& Fin,
Mark,
2%
12%
24%
Manuf,
28%
Service,
R&D,
12%
22%
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Compumedics has its Head Office in Melbourne, Australia with additional offices in Charlotte (NC), USA and Singen, Germany

13

Tide turning post GFC and high AUD

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4 45
40
3
35
2 30
25
1
20
0 15
FY08 FY09 FY10 FY11 FY12 FY13 FY14
10
-1
5
-2 0
AUDm AUDm
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EBITDA Revenues

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120
100
80
60
40
20
0
FY08 FY09 FY10 FY11 FY12 FY13 FY14
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AUD/USD Average

14

Growth Drivers – Core business

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• Compumedics/NeuroScan LTEM innovative brain analysis software and high performance amplifiers are unrivalled world class technology

• We have >20,000 systems installed worldwide. Strong reputation and brand name. Customers like buying from Compumedics.

• Trend towards Home Sleep Testing (HST) – Compumedics well positioned

• Asia Expansion – emphasis on China through our unique and long established relationships there

• Grow sleep diagnostic market position in the US by continuing to expand direct sales force

• Continuing to grow and expand our European business, with emphasis on Germany

• We are the only competitor left who can rival the largest player – Natus Medical

15

Growth Strategies – core business USA Clinical Sales Force Expansion

More sales representatives > more revenue for both sleep and neurology

Past

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USD4.5m USD8.0m

FY2014 - Now

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FY2016

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FY2017

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USD12.5m USD15.5m

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China - We are the number 1 Premier Supplier

Compumedics Clients in China

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China Sales – USD’s
4
2
0
FY12 FY13 FY14
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Earnings improvement activities

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• Outsourcing Manufacturing – lower cost regions of China and Taiwan

• EEG cap production completely relocated at Dec 14 and Grael and Somte production to be completed by July 2015

• Offshore purchasing houses to increase quality and drive down costs. Grael and Somte purchasing relocation complete April 2015

• Streamlining of logistics (final product assembly, testing and shipment) as the business grows

• Completed redesign of all major product lines for aggressive global full market access - based on at least halving cost of goods but retaining quality and performance

• New generation Grael to be released for sale June 2015

• These benefits will start to flow through in FY16 and beyond

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Strategic Value Realisation

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19

Strategic value realisation

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The company is currently considering options to simplify its business and unlock significant value for shareholders by:

• Spinning out its Germany based DWL Transcranial Doppler (TCD) ultrasound blood flow business

• Spinning out its Brain Research business (NeuroScan)

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DWL Spin out opportunity

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• DWL is the founding business and global leader in TCD ultrasound.

• Short term growth opportunities in 3D Transcranial Colour Doppler (TCCD)/Duplex Imaging

• Medium term growth opportunities in TBI and Stroke Market

• 3D TCCD is a US$900m vs DWL’s current market of $US30m. Relatively small investment required in upgrading the user interface to be able to play in this market.

• Traumatic Brain Injury (TBI) – DWL work with some of the world’s most respected researchers.

• 3D TCCD and TBI are beyond the current financial capability of DWL. Growth capital needed for this business.

• The potential listing/spin off of DWL based on revenue multiples of comparable listings:

• Revenue of $US8m (based on 4x current revenue) = $US32m

• Valueing a 30% stake (assuming CMP spin off 70%) in the new entity of US$9.6m and US$22.4m of cash freed up for investment in growth of Compumedics and potential returns to shareholders

21

Brain Research Spin Out Opportunity

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• Enormous neurology devices demand – est. $7bn pa by 2017 up from $2bn in 2010

• Growth outlook – significant for Neuroscan CURRY – World’s best of class brain analysis software

• CURRY multi modal brain analysis technology – traditional research market - $50m pa

• CURRY – multi modal brain analysis monitoring – new imaging market - $4bn pa

• CURRY – MEG Imaging – currently the preferred solution

• NeuroScan/CMP – 9% revenue growth expected. EBITDA approx. $1.1m

• Similar AIM IPO comparables – post money 5x revenue market capitalization

• Would unlock significant value, fund growth initiatives and potentially allow a capital distribution to shareholders

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eHealth – Next Phase in Compumedics Growth

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Medical Innovations – eHealth

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• Compumedics is developing two eHealth platforms from its core world-class sleep diagnostic technology, which it has built up over more than two decades and $100m+ in accumulated R&D. The two platforms are:

• eHealthMEDICS – cloud based sleep diagnostic service for existing and new professional practices.

• eLifeMEDICS – a new consumer based device and service that delivers ‘real’ medical quality sleep data for personal use. Large scale strategic and distribution discussions underway.

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eHealthMEDICS & eLifeMEDICS online healthcare solutions for life

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Our vision is to provide world-leading mobile-wireless online healthcare solutions for life.

Our mission is to be a world leading online health management services provider enabling healthcare everywhere for professionals (eHealthMEDICS) and consumers (eLifeMEDICS).

Our approach is to join forces with major healthcare service providers across Asia, USA and rest of world to provide leveraging off Compumedics proven monitors (Somte), analysis algorithms (Profusion), web and clinical enterprise solutions (Nexus).

Our delivery focus is through market leading sleep monitoring services with scale and growth to achieve best of class diagnostic and health tracking, commencing with the sleep domain. Currently we are reaching out to health service providers and seeking strategic partnerships with web, telecommunication, mobile-wireless, and technology leaders.

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eHealthMEDICS - Executive Summary:

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 The global mobile and online health category is forecast to grow rapidly

 e Health market: 5-year growth outlook for wearable technology $50- 70B; mHealth $22B; telemedicine $35B

 Compumedics: World Leader in hospital & remote eHealth medical diagnostics

• China: Premier clinical sleep and EEG research market leader with majority of established key reference centres

• Sleep: Principal market driver for consumer and professional healthcare

• Compumedics: Comprehensive spectrum of medical diagnostic and monitoring technologies from laboratory to home to consumer, providing leverage of existent technologies and relationships into consumer space with “gold standard” diagnostic technology backed by key opinion leader into consumer hands - enabling 2 to 5 year eHealth head-start

• Compumedics: New eHealth and mainstream diagnostic leader

• Patents: > 250 medical and health tracking patents plus extensive eHealth, mHealth, and wearable patent folio

• Validation, track record, recognition, FDA : > 20,000 systems installed across 50 countries

• Domains: > 400 professional ( eHealthMEDICS ) and consumer ( eLifeMEDICS ) domains

• Pilot Contracts : $10 million; Cloud enabled sleep devices and applications; total health platform 2015+

• R&D - >25 year (>$500M R&D & product shipments) platform development of integrated framework of medically approved and validated diagnostic enterprise s/ware & Apps, including accurate automated analysis and analytics .

 Our products are differentiated from ‘health trackers’ / wearables; consumer orientated but regulatory and government rebate compliant

• Compumedics is seeking investment/deep-collaboration to help rapidly deploy its consumer and medically certified mHealth web & Smartphones solutions

• An ideal Web, Telco and/or Smartphone collaboration could enable:

• Technology Leverage : Compumedics’ existing technology / IP to rapidly build-out of a scalable mHealth solution platform

• Market Access : Help establish & position partners as eHealth leader, Web, Cloud, and overall health-platform strategy

• Partner Leverage : channels into WEB services; mobile & Telcos; n/work operators; devices; consumer-electronics etc.

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eHealthMEDICS - We bring to the table an mHealth services platform that leverages core competencies built over 25 years

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[mHealth Product Ecosystem: Required Competencies ] [traditional business]

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• Inc. medical data security
(FDA, CE, TGA compliant, US
HIPPS)
• Medical grade • Established
Cloud
‘life-signals’
global
monitoring Medical Regulatory
network of
Data Compliance
Physicians
Processing
Patents / Health
IP Services
new
Clinical
Govt. mHealth
Grade
Funding Platform
Products
•
Eligibility for •
Applications
govt. health •
Network
scheme rebates
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est. 1987
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• Over 250 product patents

• Established medical

• credentials - 000s of medical publications / leading R&D team

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• Government / regulatory certification and compliance

• Clinical diagnostic software (inc. sleep disorders, neurology, heart, epilepsy, diabetes)

• Medical monitoring devices – home and hospital

• Cloud-based algorithms, data processing and security

• Global Network of Physicians

• Sensors / wearables

• Clinical monitoring sensors

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eHealthMEDICS - We are looking to collaborate with leaders in the mobiles sector to rapidly develop, scale and distribute our technology

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mHealth Product Ecosystem:
Cloud
Required Competencies
Medical Regulatory
Data Compliance
Processing
Patents / Health
IP Services
Potential Web or
new
Mobile Sector Partners:
Clinical
Govt. mHealth
Grade
• Web information leaders Funding Platform
Products
•
Web for life social n/work
leaders
• S/ware for life integrators Channels
• Device OEMs Capital Rapid / Scale
• Device Distributors Consumer
• B2B Service Providers Go-To-
•
• Product Build operators /
• Market
B2C (Consumer) Content, manufacturer channels to
development
Application and Service and Go-To- • Build-out the enable rapid of software
Providers
Market mHealth consumer onto Smartphones
•
proposition Aligned with web users
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eLifeMEDICS

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• SomFit is a device that allows medical grade measurement in a consumer environment

• The cloud based sleep data environment provides safe access by health professionals and sleep coaching for consumers

• Somfit prototypes shown at CES 2015

• Cloud based sleep database already in production

• $10m locked in orders in China

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Somfit

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• $199 one time purchase + 50c per day for electrodes

• Device can be prescribed by doctor to monitor sleep for a given period

• Device connects to smartphone and cloud based app collecting medical grade sleep data

• Access to data depending on the model (personal, prescribed) with CMP’s proprietary technology interpreting that data into useful information

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Investor Summary

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• Core business returned to growth: FY15: $33m revenue, >10% sales growth

• Sales force expansion, neurology market opportunity and earnings improvement initiatives to drive growth of core business

• Intense company focus on improving returns to shareholders. Current share price does not reflect the significant value of our company. We believe that in time the share price will reward our efforts and our shareholders

• e-Health platform is the next step for CMP’s growth. Moving 25+years and $100m+ in cumulative R&D to a modern platform to solve a massive and growing problem. $10m of contracts already locked in.

• Spin off/strategic decisions to unlock significant value, provide funds for growth and potentially capital returns to shareholders

• FY15 guidance: $33m revenue, $3.5-$4m EBITDA, $1.8-$2m NPAT

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