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8-K - KeyOn Communications Holdings Inc. | i00424_keyon-8k.htm |
KEYON COMMUNICATIONS HOLDINGS, INC.
Consolidation
Opportunities in the Rural Markets and
KeyOn Corporate Overview
November 12, 2009
This presentation includes forward-looking statements within the meaning of the Securities Act of 1933, as amended and the Securities Exchange Act of 1934, as amended. Forward-looking statements give our current expectations or forecasts of future events. Words such as expect, may, anticipate, intend, would, will, plan, believe, estimate, should, could, might, potential, predict, or the negative and plural of those terms, and similar expressions, identify forward-looking statements. Forward-looking statements in this presentation include express or implied statements concerning our future revenues, prior and potential acquisitions, expenditures, capital or other funding requirements, the adequacy of our current cash and working capital balances to fund our present and planned operations and financing needs, expansion of and demand for our product and services offerings, the growth of our business and operations as well as future economic and other conditions both generally and in our specific geographic and product and service markets. These statements are based on our estimates, projections, beliefs and assumptions, and relate only to events, as of the date the forward-looking statements are made, are not guarantees of future performance and are subject to risks and uncertainties. The occurrence of the events described, and the achievement of the expected results, depend on many events, some or all of which are not predictable or within our control. We caution that these risk factors are not necessarily all of the factors that could cause our actual future results, performance and achievements to differ materially from those expressed in forward-looking statements made by or on behalf of us in this presentation. Other unknown or unpredictable factors could also harm our results. Except as required by law, we undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, even if experience or future changes make it clear that any projected results or events expressed or implied therein will not be realized. We qualify all of our forward-looking statements by these cautionary statements.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
1
KeyOn Company Overview
Solely focused on delivering wireless broadband to
rural and underserved markets for over 7 years
KeyOn is the leader in the industry
Network currently covers 11 states, ~50,000 square miles
and over 2.3 million people
The average population of our existing markets is 4,604
people(2)
Existing scalable base of operations with systems
designed for the provision of broadband services
382 towers and 44 Hub sites
Existing distribution channels and database of customers
Cost-effective Internet termination agreements
Currently deploying state-of-the-art OSS: CRM/billing with
trouble ticket/inventory
Founded by telecom entrepreneurs to help bridge the
digital divide
Management has operated/built: paging, regional cellular,
undersea fiber optic cable networks
Growth through acquisitions and organic deployments
KeyOn Communications is the largest US rural wireless broadband company(1) with a strong history of delivering broadband to rural communities
Company Profile
Founded: 2002
Subscribers: ≈ 15,000
Residential and
Commercial Subscribers
Ticker: OTCBB: KEYO
Shares Outstanding: 20.6M
Market Cap: $46M
Headquarters Omaha, NE
Services
High Speed Broadband
Voice (VoIP)
Video (Satellite)
+EBITDA since Q4-08(3)
(2) Excludes Companys initial market launch in Las Vegas, NV.
(3) EBITDA is a measurement used by KeyOn Communications to monitor business performance and is not a recognized measure under GAAP (generally
accepted accounting principles). Accordingly,
investors are cautioned in using or relying upon this measure as an alternative to recognized GAAP
measures. EBITDA is defined as earnings or loss from operations adjusted for depreciation, amortization, goodwill impairment and non-cash
stock based
compensation expenses. EBITDA should not be construed as an alternative to operating loss as defined by GAAP
(1) Broadband Wireless Exchange Magazine Website (www.bbwexchange.com/wireless_isp/)
Illinois Map is
Indicative of In-
State Coverage
2
KeyOns Experienced Management Team
Jonathan Snyder - President and Chief Executive Officer, Director, Founder
Private equity with Clarity Partners and Pacific Capital Group
Founding shareholder and management of Global Crossing
Investment banking at Bear, Stearns & Co. Inc.
Robert Handell - Chief Operating Officer, Executive VP, Director, Founder
President, Edison Source, an Edison International Company
EVP and COO, BellSouth MobileComm
VP, Sales, Marketing and Customer Service, Bell Atlantic Mobile Systems
Jason Lazar - Vice President, Corporate Development & General Counsel, Founder
Initial member of ITU Ventures
Practiced complex civil litigation and corporate law in NY and NJ
Holds JD from Cardozo School of Law
Annette Eggert, CPA - Chief Financial Officer
Director Finance/Controller, Interpublic Group of Companies
Controller and other senior finance positions, Connectivity Solutions, a sub of CommScope
Rory Erchul - Vice President Marketing and Sales
VP Marketing & Customer Care, Allegiance Communications
Director of Marketing, CableOne
The core leadership team at KeyOn possesses nearly 100 years of telecommunications experience
3
Significant Market Opportunity Exists in Rural America
The difference in broadband penetration results from the high cost of deploying broadband services over
existing copper and cable plants outside of urban markets
DSL & cable plant is expensive to upgrade for broadband services especially in sparsely populated ex-
urban and rural markets
In these areas, wireless has been shown to have significant cost advantages in the deployment of
broadband services and in many cases, better pricing and service levels
On the whole, 36% of dial-up and non-online users cite either price or lack of availability as reasons for not
having broadband
80%
70%
60%
50%
40%
30%
20%
10%
0%
67%
63%
59%
55%
50%
47%
46%
45%
42%
38%
31%
25%
2006
2007
2008
2009
Rural
Non-rural
U.S. Total
In the past year while broadband penetration in the entire US grew at an annual rate of 15%, rural penetration still significantly lags that of urban/suburban by 21%(1)
(1) Home Broadband Adoption 2009, Pew Internet & American Life Project,
Pew Research Center, June 2009, p.14 Report
publishes results for the 12 month period from May through April.
Home Broadband Adoption
4
Consolidation of the Rural Wireless Broadband Market - RURAL UNIFi
Wireless broadband industry is extremely fragmented
KeyOn is ideally positioned to integrate wireless broadband companies in contiguous areas.
Previously acquired and integrated four acquisitions
Management experience, internal systems and billing platform ensure smooth integration
5
Fragmentation of Industry Creates Opportunity
Rural markets have been successfully served by wireless operators, but it is an
extremely fragmented marketplace much like the cable and paging industries before it
There are hundreds of small, mom and pop operators located near KeyOns current footprint
Operators typically use standards-based wireless gear
Many operators are capital constrained and cannot finance their growth beyond the start-up stage
Consolidation by operators can bring scale to the industry driving down unit economics while rapidly
growing revenues
6
Proven Track Record of Acquisitions
Date Completed
Purchase
Price
(000s)
Target
# of
Subs
Price Per
Sub ($)
October 22, 2007
$675
MicroLnk, LLC
1,388
$486
January 31, 2007
$3,800
SpeedNet Services
6,792
$559
June 1, 2006
$913
Freemont Broadband (Pocatello
market
1,161
$786
June 30, 2005
$450
SIRIS
1,130
$398
KeyOn has grown its base of 10,471 acquired subscribers to approximately 15,000
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SCALABLE ACQUISITION PROCESS
EFFICIENT PROCESS:
Proprietary deal flow
Due diligence/site visits
Asset purchases
Deal structuring
Efficient integration plan
Highly experienced and
seasoned deal team
PRICING STRATEGY:
Existing valuations
methodologies dependent
on financials
Targets are cash flow
neutral to marginally cash
flow positive
Price paid is close to or
below the replacement
cost of assets
Proven process to evaluate
IRR and NPV of each
transaction
SYNERGIES THROUGH INTEGRATION:
Centralized scalable platform to
extract synergies
Expense savings realized in area of
management, network and customer
support and G&A
Network Operating Center in Omaha
enables remote monitoring and
diagnostics
Centralized customer service
Adaptable billing platform
Scale economies in purchasing CPE
and internet termination/access loops
RURAL UNIFi - KeyOns Acquisition Process and Integration
8
Target #1 (SkyWi Communications)
Status
Executed LOI/APA
Expected close Q4 09
Location
Based in Texas with
network contiguous to
KeyOns existing networks
Business
Description
Provide wireless broadband
to areas Northwest of Ft.
Worth
Markets lack competition
ARPU = $50+
Transaction
Benefits to
KeyOn
Asset purchase with
assumption of certain
liabilities (tower leases;
internet termination)
Purchase price affords
upgrade for added network
capacity
Proximity to existing KeyOn
networks permits significant
OPEX efficiencies
Pending Transactions
Target #1
Current KeyOn
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Target #2
Status
Executed LOI
Negotiating Asset
Purchase Agreement
Location
Based in South Central
Iowa contiguous to
existing networks
Business
Description
Wireless broadband
customers include
residential, business and
critical community
facilities
ARPU = $60+
Transaction
Benefits to
KeyOn
Asset purchase with
assumption of certain
liabilities (tower leases;
internet termination)
Combining networks
results in significant
monthly savings on
internet termination
Pending Transactions
Target #2
Current KeyOn
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Growing Pipeline of Acquisitions
Acquisition Pipeline Overview
Targeted Geographic
Area
Active Targets Currently
in Discussion
Total Subscriber Base of
Active Targets
Pre-Acquisition Financials
Types of Targets
Individual Target Size
Midwestern States
30
40,000
300 5,000 subscribers
EBITDA Positive to Neutral
Boot-strapped Entrepreneurs
Rural Cooperative Subsidiaries
Divisions of Telcos and other Operating
Businesses
Entities Financed by Earlier RUS
Programs or Regional Financing Sources
11
KeyOn Corporate Update
Enhanced
investor
relations
presence with
hiring of
Liviakis
Financial
Announced
Q1-09 results
EBITDA + for
2nd
consecutive
quarter
Restructured
term debt
Extended term
for 6 years;
principal
reduction of
$450,000
Engaged
Interactive
Broadband
Consulting
Group for
application
preparation
Update on
Broadband
Stimulus
Process
KeyOns first
conference call
Continued
work on
federal
stimulus
applications
Filed for $150 million of
Stimulus funds
Converted $1.5 million of short-
term secured debt into stock
Raised a total of $2.1 million
since May 2009
Rural UNIFi Program
announced
Announced Q2-09 results
EBIDTA+ for 3rd consecutive
quarter
Partnership
with Google
announced
roll-out of
Google Apps
to current and
future
subscriber
base
Pipeline of
acquisitions
developed for
Rural UNIFi
MAY
2009
JUN
JUL
AUG - SEPT
NOV
12
Update on ARRA Efforts
Round 1 application submissions were due August 20, 2009
2,200 total applications ($4B + loans available)
1,130 last-mile infrastructure applications (BIP & BTOP)
400 BIP only last-mile infrastructure applications ($1.5B available)
Approximately 307 WiMAX wireless applications (lowest cost per household passed)
September 28, 2009 Incumbent challenge period commences for 30 days
October 5, 2009 NTIA announces initial mapping grants
October 27, 2009 NTIA/RUS announces that the date to commence award announcements has been
delayed by approximately one month
November 10, 2009 NTIA/RUS announce that future awards will be streamlined from two round to
one
KeyOn has applied for a combination of $150 million of grants and loans to quickly deploy next
generation broadband services
13
Questions and Answer
Jonathan Snyder, KeyOns CEO will now take questions from the call
participants
Due to the limited time, we ask that you limit your questions to just
one. If youd like to follow up with KeyOn offline, please email
us at
john@liviakis.com. Thank you for your understanding.
Thank you for joining todays call
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