COMPUMEDICS LIMITED — Annual Report 2017

Sep 4, 2017

1

Who is Compumedics?

A leading global, innovative developer and manufacturer of medical devices for:

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Monitoring neurological Ultrasonic monitoring of
Diagnosing disorders including long- Highly sophisticated blood flow through the
sleep disorders term epilepsy monitoring brain research brain (Transcranial
(LTEM) Doppler [TCD])
A technological leader in its chosen markets:
#1 China sleep #3 USA sleep diagnostic
#1 Australian sleep & #1Japan sleep diagnostic device device supplier and
neuro diagnostics device diagnostics device supplier to premier emerging #3 supplier for
supplier supplier facilities & #1 TCD device neurological monitoring
supplier devices
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FY17 revenues $34.4m, FY17 EBITDA $2.8m.

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• FY18 Guidance revenues $40m to $42m, EBITDA $5.5m to $6.5m.

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• 120 employees across four locations, Melbourne, Australia (Head Office), Charlotte, NC, USA, Hamburg and Singen, Germany.

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Compumedics listed ASX Dec 21, 2000. CMP has market capital of around $80m.

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All $ = A$ unless otherwise specified

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2

FY2017 – Performance Review

• FY17 Revenue (reported) $34.3m, EBITDA (reported) $2.8m, NPAT (reported) $1.3m

	FY17	FY16	Variance	Comment
Revenue - reported	$34.4m	$37.5m	(8)%	US sales (8) % on PCP and new general and sales leadership now in place, along with new and incremental sales representaNves.
EBITDA - reported	$2.8m	$5.0m	(44)%	Proftability and operaNng cash remain posiNve, validaNng changes made to product composiNon. Reported EBITDA post $1.2m US restructuring costs.
NPAT-reported	$1.3m	$3.3m	(60)%	Current year contains favourable adjustment of $0.3m relaNng to adjusNng of a deferred tax asset. $0.5m favourable in PCP.

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3

FY2017 – Performance Review

• Core: New general and sales leadership, and sales operational changes now largely in place in US. US sales FY2017 8% below pcp. US business poised for solid FY18 performance.

• Core: Asia business and China in particular strong with 33% lift in sales over pcp.

• Core: Profitability and operating cash remain positive, despite sales shortfall, validating changes made to product composition (new low cost Grael devices) and the selective outsourcing of production, along with other efficiency gains

• MEG growth initiative: Major MEG milestone achieved with first sale secured with Barrow Neurological Institute in Phoenix, AZ, USA, for delivery in H2 FY18. Further MEG opportunities being pursued.

• eHealth growth initiative – 10 sites in US secured for Nexus 360 (professional application) for a minimum $330k (USD250k) pa. Somfit (consumer application) third party discussions continue.

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4

Sales Bridge Chart – FY16 versus FY17

40 35 30 25 20 15 10 5 0 Sales
FY16 USA Aust Asia Europe Sales
FY17 Fall Base

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5

EBITDA movement – FY16 versus FY17

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6
Expenses
include
US
non-­‐
5
recurring
restructuring
costs
-­‐
$1.2m
4
3
2
1
0
EBITDA
FY1
6
Sales
Margin
Expenses
Other
Revenues
FX
EBITDA
FY17
Fall
Base
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6

Revenue Composition at $34.4m

30 June 2017

By geographic region

By product/market

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Tech.
Supply Service;
Europe;
Items; 9% 10%
22%
USA; 31% Brain
Blood
Flow; 18%
Sleep;
37%
Brain Res;
Asia; 31%
Aust; 16% 18%
Neuro;
8%
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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

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7

Growth Platform – Core and Step-Out

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–
Sales

schemaNc
only
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FY18F
FY19F
FY20F
FY21F
FY22F
Core
-­‐
Base
Core
-­‐
Sleep/Neuro
(Mid
Market)
Neuro
-­‐
MEG
Sleep
-­‐
eHealth
(Nexus360
&
Somfit)
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• Step-­‐out
  -­‐
  NEURO
  –
  BRAIN
  IMAGING –
  Winning
  the
  new
  MEG*
  sale
  with
  Barrow
  Neurological
  InsNtute
  in
  Phoenix, AZ,
  USA
  validates
  that
  we
  can
  transiNon
  from
  a
  USD30k
  sobware
  sale
  to
  a
  USD4.0m
  complete
  system
  sale.
  Delivery scheduled
  for
  H2
  FY18,
  other
  sales
  opportuniNes
  being
  pursued.

• Step-­‐out
  -­‐
  SLEEP
  -­‐
  CLOUD
  GROWTH –
  Nexus
  360
  cloud-­‐based
  professional
  sleep
  diagnosNc
  soluNon
  sold
  to
  10
  sites in
  the
  US
  during
  FY17
  to
  generate
  a
  minimum
  of
  $330k
  (USD250k)
  pa.
  Other
  sites
  in
  the
  US
  being
  pursued,
  China
  to follow.

• Core
  -­‐
  SLEEP
  &
  NEURO
  –
  DIAGNOSTIC
  GROWTH –
  By
  adding
  mid-­‐market
  devices
  we
  expand
  and
  lower
  the
  cost base
  of
  our
  product
  range,
  enabling
  us
  to
  lock
  in
  our
  premium
  market
  dominance,
  and
  boost
  sales
  in
  the
  US
  and China
  iniNally
  and
  then
  Europe,
  with
  Germany
  as
  a
  specific
  focus

• *MEG = Magnetoencephalography

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8

Core Business – Premium Focus

	Sleep Diagnostics	Neuro Diagnostics – Clinic	Neuro Diagnostics - Research	Brain Blood Flow Diagnostics
Global market – USD pa	250m	1,300m	20m	15m
Compumedics
market share	6%	<1%	30%	35%
(approximate)
Compumedics market position	Aust – 1 USA – 3 China - 1	Aust – 1 USA – 3 China - 1	Aust – 1 USA – 1 China – 1	Aust – 1 USA – 2 China – 1 Germany – 1
Business and	Capital equip –	Capital equip –	Capital equip –	Capital equip –
product type	hardware and software	hardware and software	hardware and software	hardware and software
Annuity revenues –
~ % of total –	15%	10%	5%	5%
supplies & support

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9

Core Business – US impact, profits maintained

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40,000

6,000

35,000

5,000

30,000

4,000

25,000

3,000

20,000

2,000
US
sales
restructure

15,000

1,000
and
delay

10,000

-­‐

5,000
-­‐1,000

-­‐

-­‐2,000
2011
2012
2013
2014
2015
2016
2017
Revenues
EBITDA
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AUD/USD

exchange
rate

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1.2000
1.0324
1.0271
0.9865
0.9188
1.0000
0.8386
0.7426
0.7424
0.8000
0.6000
0.4000
0.2000
0.0000
2011
2012
2013
2014
2015
2016
2017
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10

Core Business – Restored Net Cash Position

$m	FY11	FY12	FY13	FY14	FY15	FY16	FY17
Cash	1.2	1.1	1.3	1.1	2.2	3.1	4.1
Trade receivables	10.2	8.7	8.1	8.6	9.8	11.9	13.1
Inventories	5.7	5.3	5.5	6.1	5.7	6.5	7.4
Prod. dev’t	4.2	4.0	3.5	2.9	2.7	2.4	2.4
Tax asset	0.9	0.0	0.0	0.0	0.0	0.5	0.8
PP&E	0.8	0.8	0.7	0.7	0.8	0.8	0.7
Other	0.0	0.0	0.0	0.2	0.5	0.9	0.7
Assets	23.1	19.9	19.1	19.5	21.7	26.1	29.2
Trade cred.	4.7	5.0	4.7	4.7	4.4	4.1	4.2
Borrowings	2.8	2.1	2.3	2.0	2.0	2.6	0.7
Def. payment	0.9	1.4	1.4	1.4	1.6	2.0	1.6
Other	2.0	2.1	2.2	2.3	2.5	2.8	2.7
Total Liabilities	10.3	10.7	10.7	10.4	10.4	11.5	9.2
Net Assets	12.8	9.2	8.4	9.2	11.3	14.6	20.1
Debt/Equity	13%	11%	13%	11%	-2%	-3%	-17%

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11

Core Business – Adding Mid-Tier Range

Product	Used for	Bought by	Average selling price
Grael family	Sleep and neurology, high end and price sensitive models	Hospitals, doctors and service providers	USD11,500 to 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 and regular hospitals	USD20,000

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12

Next Generation Growth – Core and Step-out

	Sleep Diagnostics	Neuro Diagnostics – Clinic	Neuro Diagnostics - Imaging	Brain Blood Flow Diagnostics
Next generation growth platform	Cloud based sleep diagnostic platforms for both professional and consumer applications	Long term epilepsy market penetration into US, Europe and Asia	Leverage CURRY software into full MEG solution with KRISS	Leverage existing TCD technology and patent to Traumatic Brain Injury (TBI) application
Market potential	Professional application > USD3bn pa Consumer application > USD50bn pa	Greater than USD100m pa	Research only USD100m pa Brain Imaging >USD4bn pa	Estimated cost of TBI’s in the US alone greater than USD76bn pa
Business type	Services – fee per service	Capital equipment – bigger market	Capital equipment & Partnership – new market	Mixture of equipment and service fees

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13

Core Business - Growth Drivers

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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.

Earnings initiatives to continue to flow through in FY18 – FY20. Lower cost base enables addition of midtier plus further manufacturing and operational efficiency gains.

Opportunity to significantly grow the USA business based on the sales and marketing management and operational changes now implemented

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Expansion into untapped German market

Push into the Chinese neurology market

Ideally positioned to accelerate organic growth and value realisation

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14

USA – CMP is number 3 Supplier USA Clinical Sales Force Expansion - Indicative

More sales representatives = more revenue for both sleep and neurology

Past USD4.0m FY2017 USD3.2m to now

FY2018 USD7.0m FY2019 USD11.0m

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15

China - We are the number 1 Premier Supplier Compumedics Clients in China

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Sleep
Neuroscience
2
Neuroscan 28
5
Xin Jiang Helongjiang
Inner Mongolia 2 Jilin
Beijing 88 2 Liaoning
23
Ningxia Qinhuangdao
China Sales (invoiced) – USD’s QingHai 2 3 3 HeBei 10 3 Tianjin Dalian
16
Gansu 14 HeNan 12 Welfang
Shandong
8.4 Shaanxi 6 Rizhao
SiChuan Jining
JiangSu
6.3 10 HuBei 5 11 Shanghai
5.6 18 2 13 14 Suzhou 49
Chongqing AnHui 34 6 Zhejiang
3.8
3.4 YunNan GuiZhou 4 Nanchang
2 2 Changsha 26
Fujian
GuangXi GuangDong
27 2 Xiamen
8
Shenzhen
FY13 FY14 FY15 FY16 FY17 Hong Kong
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16

Step out 1 - Brain Imaging: 1[st] sale secured

Opportunity

CMP’s CURRY brain analysis software is already the gold standard for the MEG market MRI* is too slow to capture dynamic brain activity needed for alzheimer's et al

CMP’s agreement with KRISS provides access to a new and superior hardware platform

Compumedics can access a complete MEG sale (circa USD3 to 4m each) as opposed to the USD30k software sale

*MEG = Magnetoencephalography

**MRI = Magnetic resonance imaging

Outcome

Market & Competition

Plan

H2 FY17 – secured first CMP plans to sell sale to US based and install 1 MEG Barrow Neurological systems in FY18 Institute CMP expects to sell H2 FY18 – ship and at least 2 MEG install first MEG sale systems in FY19 H2 FY18 – Secure CMP expects to second and possibly double sales in third MEG sales FY20 to 4 to 5 MEG systems for about FY19 – gain FDA for USD20m MEG in US for clinical application

The MEG market is currently estimated at about 20 systems a year at an average selling price of USD4.0m each = US$80m/annum

This is expected to grow about 10% a year, excluding China

It is estimated that China could more than double the existing market size to about 50 units a year

The dominant existing player is Elekta, based out of Sweden, followed by Yokogawa (Japanese market) and CTF MEG (a much smaller player)

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17

– Step out 2 - eHealth Cloud Sleep Diagnostics

Nexus 360 (professional cloud sleep diagnostics) sold into 10 US sites. Will generate minimum of $330k (USD250k) annually. Initial pilot sites in China, slower traction than anticipated there. US will continue to offer opportunities in the short-term.

Compumedics are now Key partners approaching being pursued a select group of include web, strategic partners/ telco, eHealth, investors consumer to expedite the process health/ and rapidly deploy the electronics platform to market. providers and device manufacturers.

Operational systems have been developed for the cloud based capture, transfer

and translation of medical grade sleep parameters from any webenabled device. The system can then store, analyse and interpret that data

in a simple and actionable manner, reducing the need for on-site professionals.

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18

Directors & Executive Team Key Management

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NED - Mr. Alan Anderson Leading USA Attorney CMP Tenure : 11 yrs

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

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Mr. David Lawson Chief Financial Officer & Company Secretary CMP Tenure 13 yrs

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Mr. Warwick Freeman Chief Technology Officer CMP Tenure 15 yrs

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Kerry Hubick, Ph.D. Trademark, Patent & 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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19

Investor Summary

Core business profitable with on-going growth opportunities in key global markets

Compumedics remains committed to continuing to deliver superior returns to shareholders

Spin off/strategic decisions

to unlock significant value, provide funds for growth and potentially capital returns to shareholders

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International sales force

expansion , neurology and sleep market opportunity and earnings improvement initiatives to continue to drive growth of core business

Brain imaging and e-Health are the next steps Moving 25+years and $100m+

in cumulative R&D to a modern platform to solve massive and growing problems of neuro imaging in clinic and sleep disorders in the home

FY18 guidance: Sales $40m-$42m, $5.0m-$6.5m EBITDA, NPAT $4.0m-$5.0m

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Disclaimer

This presentation has been prepared by Compumedics Ltd (CMP). While the information in this presentation has been prepared in good faith and with reasonable care, no representation or warranty, express or implied, is made as to the accuracy, adequacy or reliability of any statement, estimates, opinions or other information contained in the presentation.

This presentation may contain forward looking statement. These forward-looking statement have been made based upon CMP’s expectations and beliefs concerning future developments and their potential effect on CMP (and it’s controlled entities) and are subject to risks and uncertainty which are, in many instances, beyond CMP’s control. No assurance is given that future developments will be in accordance with CMP’s expectations. Actual results could differ materially from those expected by CMP.

This presentation does not constitute an offer to sell or a solicitation of an offer to purchase any security or financial product or service. Any such offer or solicitation shall be made only pursuant to a Product Disclosure Statement, Information Memorandum, Prospectus or other offer document relating to a financial product or service.

Past performance is not necessarily indicative of future results and no person guarantees the performance of any financial product or service or the amount or timing of any return from it. There can be no assurance that the financial product or service will achieve any targeted return, that asset allocations will be met or that the financial product or service will be able to implement its investment strategy and investment approach or achieve its investment objective.

The information contained in this presentation is not intended to be relied upon as advice to investors or potential investors, who should consider seeking independent professional advice depending upon their specific investment objectives, financial situation or particular needs.

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