investor presentation january 2008 - media.corporate...
TRANSCRIPT
Investor Presentation
January 2008
7300 College Blvd., Suite 302, Overland Park, KS 66210 • +1 888.480.TMNG • www.tmng.com
TMNG Global Confidential and Proprietary — © 2008 TMNG Global.No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or means (electronic, mechanical, photocopy, recording or otherwise) without the permission of TMNG Global.
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TMNG Global Confidential and Proprietary — © 2008 TMNG Global
Disclosure Regarding Forward-Looking Statements and Non-GAAP Measures
Cautionary Statement
This presentation contains certain forward-looking statements, including certain projections of results of operations. These forward-looking statements involve risks and uncertainties. Our actual results may vary materially from those contemplated by such forward looking statements. Among the factors that could cause actual results to differ materially are general economic conditions, customer concentration, competition and the additional factors discussed in Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 30, 2006, which is available through our website at www.tmng.com. Investors are cautioned not to place undue reliance on any forward-looking statements.
Non-GAAP Financial Measures
This presentation contains certain non-GAAP financial measures, included adjusted gross margin and adjusted cash earnings. We use adjusted gross margin and adjusted cash earnings as measures of our operating performance. These measures are not in accordance with GAAP and should not be considered in isolation from, or as a substitute for analysis of, our financial information reported under GAAP.
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TMNG Global Confidential and Proprietary — © 2008 TMNG Global
Overview
TMNG Global is positioned at the nexus of converging communications, media and content business models, providing strategic and management consulting and software solutions on a global basis.
• Clients include communications service providers, MSO’s, media & entertainment, technology companies, and financial services firms
• Over 600 consultants and associates
• Proprietary software solutions supporting revenue assurance & data integrity for telecom and communications clients
• Offices in Boston, Chicago, Kansas City, London, New Jersey, New York, Washington, D.C., and Shanghai
• Partnerships with leading technology companies and systems integrators
• Founded in 1990
• Nasdaq: TMNG
TMNGTMNG’’s differentiator is its unmatched depth and breadth of offeringss differentiator is its unmatched depth and breadth of offerings to to support change driven by convergence and technology support change driven by convergence and technology –– we deliver we deliver
proprietary knowledge and solutions. proprietary knowledge and solutions.
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TMNG Global Confidential and Proprietary — © 2008 TMNG Global
Summary
Over the past two years TMNG Global has aggressively repositioned itself to drive significant revenue growth. Our number one goal is to capitalize on the momentum built in 2007 with continued emphasis on positive cash earnings.
Deep-rooted global consultancy/software provider well positioned to serve the convergence of communications, media and content onto wireless and IP platforms
Emerging relationships with key players in cable, entertainment, media and content —more than 100 new clients added from 2005 to Q3 2007. Outstanding Top 10 client base: ATT, B-Sky-B, Comcast, Disney, GE Capital, Sprint, TerreStar, Time Warner, Verizon and Virgin Media
Liquid and well-capitalized balance sheet — $29 million in cash, zero debt as of Q3 2007
More than 100% year-over year revenue growth, swing to positive cash earnings during2007
Performance driven by organic growth, international footprint expansion, and complementary acquisitions
TMNG Global continues to demonstrate the benefits of our strategTMNG Global continues to demonstrate the benefits of our strategic ic and operational initiatives in 2007 as we begin fiscal 2008. and operational initiatives in 2007 as we begin fiscal 2008.
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TMNG Global Confidential and Proprietary — © 2008 TMNG Global
Business Highlights
Recent Business Highlights
Acquisition of RVA Consulting LLC (August 2007) – Accretive acquisition that strengthens our technical expertise and penetration into the Tier One telecom providers to leverage our core transformational solutions.
Acquisition of Cartesian Ltd. (January 2007) – Adds technical consultancy and leading software solutions to the TMNG suite; profitable business contributes to growth and expanded presence in the UK and Western Europe.
Growth of Cable Practice – Cable practice launched in Q1 2006, now serving 4 major cable MSOs, supporting merger integration, commercial and residential VOIP launches enabling bundled service offerings.
Improved Scale – Significant revenue growth provides for leverage of fixed SG&A base. SG&A currently in the mid-40’s as a percentage of sales, representing greater than 30 percentage point improvement. We plan to drive further leverage.
Continued Momentum – Improved sustainability through repositioned core transformational offerings to support larger, longer term client engagements and the addition of software solutions through Cartesian.
Acquisition of TWG Consulting LLC (October 2007) – Accretive acquisition that adds services in the areas of organizational design and development; compliments and strengthens TMNG offerings to our core strategic clients.
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TMNG Global Confidential and Proprietary — © 2008 TMNG Global
Four-Year Revenue Trend
$23.7$30.4
$34.0
$51.0
2004 2005 2006 Q3 2007 year-to-date
$15.1
$5.8 $5.2 $6.5 $6.2 $6.2 $8.1
$7.1$9.0 $8.7 $8.6 $9.5
$7.2
$20.8
$15.1
Q1 Q2 Q3 Q42004 2005 2006 2007
Quarterly Revenues (in $ Millions) Annual Revenues (in $ Millions)
*
*
Strategic investments in key markets like cable are driving doubStrategic investments in key markets like cable are driving double digit organic growth, le digit organic growth, coupled with the acquisition of complementary businesses such ascoupled with the acquisition of complementary businesses such as Cartesian, RVA and Cartesian, RVA and
TWG. We expect fullTWG. We expect full--year revenues for 2007 to be between $71 and $73 million.year revenues for 2007 to be between $71 and $73 million.
* As disclosed on our Q3 earnings call, Q4 2007 revenues are expected to be between $20 to $22 million.
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TMNG Global Confidential and Proprietary — © 2008 TMNG Global
Software SolutionsManagement ConsultingStrategy
TMNG Global Offerings
TMNG Global is a leading provider of consulting services to the communications industry. Our integrated product and services portfolio gives us an end-to-end perspective and capability.
• Revenue Assurance
• Business Controls and IT SOX
• Converged Services
• IP Transformation• Network Analysis• Business Analytics• Requirements
Assessment• Systems
Benchmarking
• Market Research• Go-to-Market
Planning• Customer Acquisition• Customer Retention• Product Development
and Management• Product Marketing• Viral Marketing• Customer Care
Strategies• Retail Channel
Strategy• Benchmarking
• Business Intelligence• Business Operations
Outsourcing• Business Operations
Reporting• Billing Operations• Settlements• Operational
Benchmarking• Network Management
• Business Case Development
• Valuation and Assessment
• Due Diligence• Channel Strategy
and Alignment• Process
Reengineering• Balanced Scorecard• Operations Planning• Back Office Planning
• Opportunity Analysis• Market Sizing• Forecasting• Competitive
Landscape• Economic &
Quantitative Analysis• Cost Benchmarking• Segmentation• Product Development• Marketing Strategy
• Revenue Assurance• Requirements
Assessment• Systems Implementation• Software Sales• Technical Consulting• Network consulting• Custom applications• Billing & Mediation
Systems• Provisioning Systems• Inter-operator Billing
Systems
Business Systems & Processes
Business Systems & ProcessesMarketingMarketingStrategyStrategy Operations
PlanningOperationsPlanning
BusinessOperationsBusiness
OperationsSoftware &
Technical ServicesSoftware &
Technical Services
Our acquisition of TWG adds core competencies in the areas of orOur acquisition of TWG adds core competencies in the areas of organizational development and knowledge ganizational development and knowledge management relative to a core component of our client base management relative to a core component of our client base –– leading U.S. telecom providers.leading U.S. telecom providers.
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TMNG Global Confidential and Proprietary — © 2008 TMNG Global
Client List
TMNG Global’s client base has expanded significantly into the cable, content and media as we support next generation business cases.
We Serve the Global Communications and
Media Industry Ecosystem
Wireless and Wireline CarriersWireless and Wireline Carriers
Cable, Content and MediaCable, Content and Media
High Technology & Internet PlayersHigh Technology & Internet Players
Financial InvestorsFinancial Investors
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TMNG Global Confidential and Proprietary — © 2008 TMNG Global
Strategic Initiatives
Measuring the qualitative strategic initiatives with quantitative results.
Key Strategic Initiatives toAddress Mega-Drivers of the Market Results
Enhancing our core strategy and management consulting offerings with emphasis on IP and wireless solutions.
• From the start of 2006 through Q3 2007, approximately 45% of business has been support of wireless and IP client initiatives
• Projects include commercial and residential VOIP launches and supporting 4G rollouts
NextNext--Generation TechnologyGeneration Technology11
Increasing our international presence in Europe and Asia.
InternationalInternational22
Developing our intellectual capital and leveraging relationships to expand into cable, media and content.
Convergence / ConsolidationConvergence / Consolidation33
Launching solutions and services and partners that facilitate wireless enablement, IP transformation and convergence.
SustainabilitySustainability44
• Approximately 40% of business is now international• During Q2 2007, TMNG established a WOFE in China
• From the start of 2006 through Q3 2007, added approximately 42 new customers in wireless, media, and entertainment
• Organically grew cable from zero to over a $12M annual run rate as of Q3 2007
• Half of our top 10 customers are cable, media & content
• Ascertain software suite expands sustainable model• S3 investment / partnership
Our initiatives are driving key developments and new business Our initiatives are driving key developments and new business wins that are shaping the direction and future of our business. wins that are shaping the direction and future of our business.
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TMNG Global Confidential and Proprietary — © 2008 TMNG Global
Consolidated Operating Results
$23.7
$30.4$34.0
$51.0
($3.3)($0.7)
($5.7)
$24.4
$17.0$15.5
$11.4
$3.0
Revenue
Pro FormaGross Margin*
Pro FormaCash Earnings*
We expect to gain additional leverage of our fixed cost base to drive EBITDA margins as we continue to scale.
Consolidated Operating Results (in $ Millions)
2004 2005 2006 2007 Q3 year-to-date
As disclosed on our Q3 earnings call,As disclosed on our Q3 earnings call, we expect revenue to be between $71 and $73 million we expect revenue to be between $71 and $73 million for the fullfor the full--year 2007, GAAP gross margins trending upward from the midyear 2007, GAAP gross margins trending upward from the mid-- 40%40%’’s, and s, and
profitability on a nonprofitability on a non--GAAP basis approaching $5.0 million.GAAP basis approaching $5.0 million.
* Amounts are non-GAAP amounts, see Appendix for reconciliation to GAAP amounts.
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TMNG Global Confidential and Proprietary — © 2008 TMNG Global
Margin and SG&A Trends
Our project mix has changed in favor of larger, longer-term projects lasting over multiple quarters from shorter-term, higher-margin engagements. In addition, we have reduced SG&A substantially in relation to revenues.
50.4% 48.7%46.1%
48.7%45.0% 43.9%
49.5%
1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07
Gross Margin Percentage
78.3% 78.8%85.8% 88.0%
44.9% 46.7%43.0%
1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07
SG&A as a Percent of Sales
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TMNG Global Confidential and Proprietary — © 2008 TMNG Global
Key Financial Metrics
Revenues per FTE(in 000s)
$326 $324$360
$295
$351 $365 $340 $328
4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07
Utilization
85%86%82%83% 84%76% 72% 73%
4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07
DSO’sDomestic / International Revenue Split
48% 58%
27% 24%50% 52% 42%
76%73%73%97%97%
50%
3% 3%27%
4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07
= International = Domestic
60
44
63
56 51
64 6257
4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07
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TMNG Global Confidential and Proprietary — © 2008 TMNG Global
Financial Position
We continue to maintain a very strong balance sheet with significant cash and short-term investments and no long-term debt. We have achieved growth while maintaining healthy working capital levels.
Quarter Ended September 29,
2007ASSETS
Cash and Short-term Investments 28,672$ Accounts Receivable, net 20,846 Other Current Assets 2,266
Total Current Assets 51,784
Property and Equipment, net 1,714
Intangible Assets 26,061
Other Non-Current Assets 928
TOTAL ASSETS 80,487$
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities 21,070$
Non-Current Liabilities 4,475
Total Liabilities 25,545
Stockholders' Equity 54,942
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 80,487$
($ in Thousands)
Our strong cash and working capital positions give us Our strong cash and working capital positions give us the flexibility to invest in key growth opportunities. the flexibility to invest in key growth opportunities.
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TMNG Global Confidential and Proprietary — © 2008 TMNG Global
Looking Forward
As we begin 2008, our focus will be directed toward …
Optimizing marketplace and financial synergies from recent acquisitions.
Driving the benefits of geographic diversity via Cartesian and our emerging presence in China and Southeast Asia.
Extending our technical capabilities across practice areas to increase client retention and support change from convergence
Continuation of our recent success in emphasizing financial discipline and tight controls on SG&A to expand leverage.
Top line growth and achieving sustainable positive cash earningsthroughout 2008.
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TMNG Global Confidential and Proprietary — © 2008 TMNG Global
Appendix
APPENDIX APPENDIX –– NonNon--GAAP ReconciliationGAAP Reconciliation
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TMNG Global Confidential and Proprietary — © 2008 TMNG Global
Non-GAAP Reconciliation
THE MANAGEMENT NETWORK GROUP, INC.RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED MEASURES(in thousands)
Reconciliation of GAAP gross margin to non-GAAP adjusted gross margin:
GAAP gross margin 10,749$ 15,286$ 16,464$ 23,739$
Non-cash share based compensation expense 636 258 560 124 Intangible amortization - - - 558
Adjustments to GAAP gross margin 636 258 560 682
Non-GAAP adjusted gross margin 11,385$ 15,544$ 17,024$ 24,421$
Reconciliation of GAAP net loss to non-GAAP adjusted cash (loss) earnings:
GAAP net loss (9,970)$ (2,772)$ (12,370)$ (2,817)$
Non-cash share based compensation expense 2,438 1,070 2,857 712 Goodwill, intangible and long-lived asset impariment - - 2,074 - Depreciation and amortization 1,672 822 1,094 3,059 Loss from discontinued operations 2,276 - - - Real estate restructuring 1,545 75 - - Legal settlement (1,294) 95 (31) - Special Committee investigation - - 720 2,451 Gain on settlement of foreign withholding tax dispute - - - (452)
Adjustments to GAAP net loss 6,637 2,062 6,714 5,770
Non-GAAP adjusted cash (loss) earnings (3,333)$ (710)$ (5,656)$ 2,953$
2004Q3 2007 Year-
to-Date20062005
We use adjusted gross margin and adjusted cash earnings as measures of our operating performance. These measures are not in accordance with GAAP and should not be considered in isolation from, or as a substitute for analysis of, our financial information reported under GAAP.