annual general meeting - frontier smart 04 24... · 2018-04-24 · 1 highlights fy2017 financial...
TRANSCRIPT
Annual General Meeting
24 April 2018
1
Highlights FY2017
Financial
• Revenues up 28% to £41.0m (FY2016: £32.1m)
• EBITDA* up 171% to £1.9m (FY2016: £0.7m)
• R&D expenditure stable at £6.5m (FY2016: £6.6m)
• As of 31 December 2017, the Group’s gross cash balance was £5.9m; the net cash balance was £3.0m
Operational
highlights
• Strong performance in Radio, especially in H1, driven by switch-off of FM radio in Norway plus steady
growth in other European markets
• In Smart Audio, over 20 models released incorporating the Group’s solution with Google Chromecast
• Working demonstrations of Frontier’s Smart Audio solutions, incorporating Google’s Voice Assistant,
Amazon’s Alexa Voice Services and Apple AirPlay 2, presented at CES in January 2018
• Ten design wins secured for devices incorporating Frontier’s Smart Audio solution with Google’s Voice
Assistant – products to be released in 2018
FY2018
Outlook• The Board expects modest growth in revenues and EBITDA, as Group continues to invest in Smart Audio
* Earnings before interest, tax, depreciation, amortisation and before share based payments
2
Frontier: a pioneer in digital audio technologies
• #1 provider of consumer DAB Digital and
Advanced Radio solutions
• World leading technology (silicon, hardware,
software, customer support)
• Positive cashflows
• Hardware and software for cloud connected /
voice recognition audio devices
• Working with Google, Amazon and Apple as
solution provider for 3rd party brands
• Still in start-up phase – growing number of
design wins, including for voice-enabled devices
Radio
• Digital Radio
• Advanced Radio
Smart Audio
• Amazon
• Apple
3
Strategic objectives 2018-20
Radio
• DAB Radio
• Advanced Radio
Smart Audio
• Google Voice
• Amazon Alexa
• Apple AirPlay 2
Smart Home
• Home appliances
• Home security
• Home automation
Maintain
• EBITDA (FY2017): £9.5m*
• R&D focused on retaining
market share and margins
Build
• Frontier goal to be leading system integrator
for 3rd party brands
• Multi-ecosystem platform support for smart
speakers (majority with voice)
- turnkey module solutions
- licensing Frontier’s SmartSDK (model in
development)
Explore
• Evaluate market opportunity
- engage with ecosystem
(partners / customers)
- identify where Frontier
technology is applicable
• Develop business plan (first
revenues expected in 2020)
* Before Group costs
4
Radio: market leader and cash positive
• FY2017 EBITDA: £9.5m
- 80% share of consumer DAB market
- 2017 volumes received one-off boost from FM
switch-off in Norway
- underlying volumes in continental Europe show
steady growth
• Incremental approach to R&D (~£1.8m p.a.), e.g.
- automotive aftermarket
- next generation advanced radio platform
Frontier customers
5
Radio: mid-term prospects are healthy
Germany: Government
commits to digital future
Italy: law that receivers must be
digital from 2020
France: in 2018, 20% coverage
triggers receiver law
Netherlands: fastest ever
launch
Switzerland: DSO
2020-24
UK: 49.9% digital – government
review
Denmark: DSO under
discussion
Australia: extending geographic
coverage
6
Three strands to Frontier’s growth strategy
Audio
roadmap
• Grow existing Radio and Smart Audio business
• Developing licensing model for SmartSDK
1
Smart Home
(existing assets)
• Aim to repurpose existing audio assets (SmartSDK / Minuet) for non-audio devices, e.g. home
automation, appliances, assisted living, security
• Flexible business models – e.g. turnkey, licensing, services, other
2
Smart Home
(new solutions)
• Identify new non-audio smart categories to address with new products
• Market entry strategy: new product development and / or partnerships
3
7
Smart speaker market: first party and third party devices
Enabled by Frontier
solutions
Ecosystem in-house
technology
Apple
Homepod
Amazon
Echo & Dot
Home
JBL Playlist with Google
Chromecast built-in
Marshall Acton
with Chromecast built-in
First party devices Third party branded devices1 2
8
Source: Strategy Analytics (April 2018)
Smart Audio: anticipated market growth
Smart Audio device annual shipments, millions
Annual shipments of 146m units by 2020; 30m from third party brands
9 9 8 62 7 13
24
32
62
92
116
2017 2018 2019 2020
42
78
113
146
Non-voice 3rd party voice 1st party voice
• Smart Audio growing rapidly – especially
voice-enabled devices
- to date, voice assistant sector dominated
by first party products
- 3rd party products expected to increase
share
- speed / scale of transition to be
determined
• For 3rd party brands, key to success is
differentiation
9
Current dominance of first party products is enabled by aggressive subsidies
• Ecosystem players: battle to establish their
platforms in consumer homes
- aggressive subsidies
- Google: “bleeding cash trying to take on
Amazon in the smart home”1
• Why will this change / why will 3rd party sector
emerge?
- subsidies not sustainable (costing hundreds
of millions of dollars)
- Google and Amazon not audio specialists /
focused on core smart assistant products
- consumer demand for choice / wider
functionality
(1) https://www.theverge.com/2018/4/23/17272748/alphabet-google-q1-2018-earnings-nest-smart-home-amazon-competition
10
• Voice assistants
• Cloud services
• Music providers
• Smart home
connectivity
• Hardware (module)
• SmartSDK licensing
• Turnkey solutions
• Engineering services
(customisation)
• Pre-certification / eco
system compliance
• Mobile app & data
services
• Industrial Design
• Acoustic
engineering
• Manufacturing
• Product Marketing
• Distribution
Frontier’s position in Smart Audio value chain
Ecosystem
players
Solution
providers
ODMs
(Manufacturers)3rd Party
Brands
Retailers End Users
Wi-Fi / processor
chips
11
Smart Audio update
2017: 20 models with
Google Chromecast built-in
2018: Ten models with
Google Voice Assistant
Design wins
• Product releases
- first voice-enabled products using Frontier
solutions due to come to market mid-2018
• Business development
- new senior manager joins end of April to
focus on licensing of SmartSDK and services
• R&D (expenditure closely monitored)
- maintain SmartSDK to keep up with Google,
Amazon and Apple changes
- additional expenditure focused on providing
differentiation to 3rd party brands
12
Differentiation for 3rd party brands: e.g. displays
• Frontier platform enables 3rd party brands to integrate
Google Voice Assistant into Smart Speakers
- microphones provide voice control of the speaker
and other “works with Google Assistant” products
- display (e.g. clock face) provides differentiation
from 1st party products
• This year will see release of Amazon Voice Service
and AirPlay 2 versions of SDK
• Available now
Display feature – not available
on 1st party product
Frontier platform for Google Voice Assistant plus display
13
Smart speaker with Frontier
Minuet module inside
Control via multiple 1st party devices
(voice and app control)
Differentiation for 3rd party brands = multi-ecosystem speakers
Available H2 18
Minuet module
No microphone
in speaker
14
Smart Home opportunity
Smart
appliances
Smart
thermostats
Smart
lighting
Security Home health
Frontier’s role: the enabler that makes ‘dumb’ devices smart
15
Frontier will create solutions to enable smart home products
Cloud-based AI
Frontier’s transferable smart technology
assets
Hardware
solutions
Connectivity / voice
SDK
Frontier cloud
services
Nanuet solution
Toolkit of technologies to
enable device manufacturers
make their devices smart, e.g.
appliances,
16
Example use cases: white goods
Control Inform Safety Diagnostics Energy management
“a bit warmer please” “temperature has been
adjusted”
“abnormal temperature
changes detected in living
room, please check”
“the filter is dirty, please
clean it”“use weather information
to optimise use”
“cook lasagne”“oven is not reaching
desired temperature,
heating element seems
broken, shall I call for
service?”
-“smoke was detected,
oven was shutdown,
please check”
“your food is ready!”
“fast freeze my
vegetables”
“your strawberries are
almost expiring"
- “suggest alternative
temperature settings”
“compressor efficiency
below norm, inform service”
“have my coloured clothes
washed by 4pm”
“the washing is ready for
drying”
“drum overheated,
machine was stopped,
please check”
“schedule washing for off-
peak hours when
possible”
“waterpump is on brink of
failure, inform service”
Safety and diagnostics may add most value
17
Board changes
Not standing for
re-election
• Dr Martin Knight, after nine years as a Non-Executive Director and Chairman since July
2015, is not standing for re-election at the Annual General Meeting (‘AGM’)
• Chris Batterham, a Non-Executive Director since 2012, is also not standing for re-election
• Both will cease to be Directors at the conclusion of the AGM
New & remaining
NEDs
• Sir Hossein Yassaie was appointed a Non-Executive Director in March 2018
• Martin Harriman, who joined the Board in December 2016, continues in his current
position of Non-Executive Director
Search
process
• Recruitment of a new chairman and NED / Audit Chair at advanced stage
• Expect to be able to make these appointments by mid year
18
Summary
• Strong financial performance in 2017
• Well-positioned in core markets
- #1 in Radio
- strong technology base and ecosystem
relationships in Smart Audio
• Modest growth expected in 2018
• Medium-term growth prospects favourable
- stable, cash-generative radio business
- potentially attractive prospects in Smart
Audio and Smart Home
Position today Prospects
