TSXV: PHO March 2017 A Leading Developer of Optical Measurement Technologies TSXV: PHO
March 2017
A Leading Developer of Optical Measurement TechnologiesTSXV: PHO
TSXV: PHO
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Important Cautions Regarding Forward-Looking StatementsThis Presentation contains “forward-looking statements” within the meaning of applicable Canadian securities legislation. Such forward-looking statements concern the business and anticipated financial performance of the Company and include, without limitation, statements with respect to the Company’s objectives, goals, liquidity, sources of capital, expectations of sales and ownership and continued development of its technologies and products.
These forward-looking statements are based on certain factors and assumptions, including, without limitation, the Company’s ability to successfully complete new purchase orders along the timelines expected; continued and future demand for the Company’s products; continued sales to the Company’s major customers; the continued financial health of the semiconductor industry; the Company ownership of the intellectual property rights and good will and products and process that it believes that it has or should have; and the Company’s ability to continue and further enhance revenue diversification and open new market opportunities.
Forward-looking statements are subject to a variety of known and unknown risks, uncertainties and other factors which could cause actual events or results to differ from those expressed or implied by the forward-looking statements, including, without limitation the Company may not have all of the intellectual property rights and goodwill that it believes that it has and should have as these matters are currently in dispute with photon R &D Ltd.to which the Company had outsourced its research and development; uncertainties in the availability and cost of financing for the Company to enable the Company to achieve its goals; uncertainties relating to the market for the Company’s products and maintaining a stable level of orders; fluctuations in revenue as a result of volatility in the markets and product mix; risks relating to the Company’s present reliance on four major customers for the majority of its sales; risks relating to the Company’s reliance on the financial health of the semiconductor industry; risks relating to the development of competing technologies and the possibility of increased competition; the effect of slow growth in the United States, the Company’s principal market, as well as in Canada and other economies generally and other economic trends and conditions in the markets that the Company and its customers serve; risks associated with technical difficulties or delays in product introductions, improvements, implementation; uncertainties in product pricing or other initiatives of the Company and its competitors; uncertainties in factors that may result in a reduction in capital expenditures and/or delayed buying decisions affecting demand for the Company’s products; risks relating to currency fluctuations, particularly between the Canadian and United States dollars; and risks in pursuing additional development projects to support existing customers or pursue other business opportunities.
The foregoing assumptions, risks and uncertainties are not exhaustive of the items that may affect our forward-looking statements. Should underlying assumptions prove to be incorrect or one or more of these risks and uncertainties materialize, actual results may vary materially from those described in the forward-looking statements. The Company’s forward-looking statements are based on beliefs, expectations and opinions of management on the date the statements are made. For the reasons set forth above, persons should not place undue reliance on forward-looking statements. The Company undertakes no obligation to update or revise any forward-looking statements included herein if these beliefs, estimates and opinions or other circumstances should change, except as otherwise required by applicable law.
© Copyright 2017 Photon Control Inc. All Rights Reserved.
TSXV: PHO
Stock Price (3/22/17) $1.35
52 Week Low-High $0.65–$1.54
Avg. Vol. (3 mo.) 325,255
Shares Outstanding 108.5M
Free Float (est.) 92.3M
Insider Holdings (est.) 9%
Institutional Holdings 16%
Market Cap $146.5M
Enterprise Value $114.0M
Founded 1988
Full-Time Employees 51
$ CADData source: Yahoo Finance!, Capital IQTTM/YTD/MRQ at September 30, 2016
Revenue1
Gross Profit1
Net Income
Photon Control (TSXV: PHO) Key Stats
13 14 15 YTD
$3.5M$5.0M
$9.2M
$5.2M
13 14 15 16E
$17.3M$21.0M
$27.6M $31.7M
13 14 15 16E
$10.9
$10.1M
$14.6M
$16.2M
Total Revenue (2016E)1 $31.7M
Gross Profit (2016E)1 $16.2M
Net Income (TTM) $6.9M
EV/Revenue (2016E) 1 3.6x
Cash and Invest. (Q4-16) 1 $32.5M
Total Assets (mrq) $40.9M
Backlog (Q4-16)1 $8.8M
3
1. 206E is based on preliminary, unaudited results issued on Feb. 27, 2017; subject to change based on the Company’s customary year-end audit review process.
TSXV: PHOPhoton Control at a Glance
A leading harsh-environment measurement solutions innovator
Our optical sensors measure temperature, position & flow
Our technology helps customers increase yield and efficiency, and reduces cost
We serve an expanding base of customers, primarily in the thin film applications & semiconductor market
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TSXV: PHOMulti-Billion Dollar Optic Sensor Market
A fiber optic sensor is a device that employs optical technology to transmit signals to amplifiers for processing
Expected to grow 9% annually to $3.5B by 20201
Fiber optic sensor advantages:• Easy integration and small form factor
• Non-conductance of electric current
• Immune to RF or electromagnetic interference
• Fast and accurate: measure at speed of light
Increasing demand for fiber optic sensors in oil & gas, manufacturing, and electronics
51. InsightBee 2016
TSXV: PHO
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Internet of Things Driving Photon Control’s Core End Market – Semiconductor Equipment
Proliferation of connected devices is rapidly increasing demand for semiconductors
Semiconductor manufacturers transitioning to new design and production capabilities (i.e. multi-pattering, 3D NAND, FinFET)
These technologies impact the processes and steps that require greater performance, measurement precision & repeatability
Today, Photon Control is in only 1 of 40 steps of the semi manufacturing process, presenting a significant opportunity to expand within its core customer base
Global Wafer Fab Equipment (WFE) Market Growing 15% Driven by
Advanced Nodes (nm)1
2015A 2016F 2017F 2018F 2019F
$33B
$38B14nm+ 10nm <7nm
1. Gartner, July 2015
TSXV: PHO
Photon Control’s Core Etch Market Growing with Opportunity to Expand into Other Processes
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Lam Research47%
Tokyo Electron Ltd.29%
Applied Materials10%
Hitachi9%Others
5%
Etch & Clean$8.1B
Lithography$8.1B
Deposition$8.0B
Process$3.9B
Test$3.6B
Assembly$3.3B
Other$2.2B
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Global WFE Market by Process ($ USD; 2016)
Etch Equipment Market Share1
(2016)
1. Technavio, Gartner
TSXV: PHO
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Wafer Temperature Uniformity:• Customer needs uniformity• Chamber design team needs solutions fast• Vendors provide customized proprietary solutions
Semiconductor Equipment Manufacturer Challenges
Temp probe
Heater
Controller
Converter
TSXV: PHO
Other Multi-Billion Dollar Growth Markets Requiring Precision Measurement Solutions
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Energy Life Science Power
TSXV: PHO
Fiber Optic Temperature &Positioning Sensors Focus® Optical Gas Flow Meter
• Immune to electro-magnetic interference and accurate in high-RF environments
• End markets: Semi manufacturing, flat panel display, life sciences, power, oil & gas
• Measure and monitor the flow of flare gases in oil production
• End markets: Oil & Gas
Our Solutions: The Technology within the Technology
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TSXV: PHOGlobal Sales & Distribution
Gas Flow Meter Optical SensorsSpectrometer Spectrometer & Optical Sensors
U.S.
China
Other
Canada
Eu-rope
2015 Global Sales
11
TSXV: PHO
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Key Differentiators & Competitive Advantages
20-year track record & strong industry reputation
Trusted solutions provider with deep industry experience
Long product life cycles
Deeply embedded with customers and design process
Longstanding customer relationships
ISO 9001:2008 certified company & products
Intellectual property portfolio
TSXV: PHOCompetitive Strengths – IP
Speed-of-Light Measurement
Proprietary Manufacturing Process
Material Science-Based Technology
Proprietary Optical Illuminator Proprietary Fiber Light Path Active Materials
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TSXV: PHO
2011 2012 2013 2014 2015 2016E
$4.4 $3.9
$7.3
$10.1
$14.6
$16.21
38.6% 37.1%42.3%
48.2%52.9% 51.1%
Key Financial Metrics
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2011 2012 2013 2014 2015 2016E
$11.5 $10.5
$17.3
$21.0
$27.5
$31.71
Gross Profit(CAD) $ in millions
Revenue(CAD) $ in millions
22% CAGR (2011-2016E)
1. Preliminary, unaudited figure issued on Feb. 27, 2017; subject to change based on the Company’s customary year-end audit review process.
TSXV: PHO
2011 2012 2013 2014 2015 YTD$0.9
$2.6$1.8
$8.1
$12.0
$4.9
Key Financial Metrics
15
2011 2012 2013 2014 2015 YTD
$4.6
$3.0$3.5
$5.0
$9.2
$5.2
Free Cash Flow(CAD) $ in millions
Net Income(CAD) $ in millions
YTD @ Q3-16
YTD @ Q3-16
TSXV: PHOStrong Fundamentals Support Growth
In millions except for current ratio data
Dec. 31, 2016
Dec. 31, 2015
Cash & Investments1 $32.5 $25.0
Current Ratio 13.7x 14.0x
Total Debt $0 $0
Sales Backlog1 $8.8 $5.6
2011 2012 2013 2014 2015 2016E$1.0
$3.6$6.1
$14.1
$26.2
$32.51
101% CAGR (2011-2016E)
CAD $ in millions
16
Cash & Short-Term Investments
1. Preliminary, unaudited figure issued on Feb. 27, 2017; subject to change based on the Company’s customary year-end audit review process.
TSXV: PHO
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2017 Growth Strategy & Initiatives
Strengthening for growth:• Doubling manufacturing capacity• Reinforcing core operating capabilities• Completing state-of-the-art R&D facility
Expanding the core business: • Expanding to new semiconductor applications• Expanding within current customers• Expanding to new customers
Pursuing adjacent market opportunities:• Flat panel display• Other thin film applications• Energy, medical, Oil & Gas
Supporting shareholder interests:• 20% NCIB goal• Best in class investor relations focus Q3-15 Q4-15 Q1-16 Q2-16 Q4-16E
$4.8
$5.6$6.1
$6.7
$8.81
Sales Order Backlog(CAD) $ in millions
83% (Q3-15 vs. Q4-16E)
1. Preliminary, unaudited figure issued on Feb. 27, 2017; subject to change based on the Company’s customary year-end audit review process.
TSXV: PHO
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2012 2013 2014 2015 2016E
$10.5
$17.3
$21.0
$27.5
$31.7
Key Takeaways
Proven business model with consistent management executionStrong competitive position in billion-dollar end marketsGrowing within current customer base and expanding into adjacent markets (flat panel display and other thin film applications)Strengthened management and board of directorsHealthy balance sheet: $32.5M1 in cash & investments and no debtCommitment to invest 20% of annual free cash flow to repurchase company stock
Revenue Growth(CAD) $ in millions
37% CAGR (2011-2016E)
1. Preliminary, unaudited figure issued on Feb. 27, 2017; subject to change based on the Company’s customary year-end audit review process.
TSXV: PHO
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Board of Directors
Michael Goldstein
Neil McDonnell
Ronan McGrath
Dr. Robert Breault, PhD
Dr. Joseph S. Litner, M.D.
Michael Torok
• Director and Acting CEO
• Former Chief Commercial Officer of Ballard Power Systems
• Former CEO of Actuality Systems and iFire Technology
• Held senior roles at GE and was responsible for development and manufacturing of NASA's Mars Observer deep space mission
• Joined board in 2016; appointed Chair in Jan. 2017
• Chairman of Agreement Express and Director of TitanStar Properties
• Former Chairman of QHR Technologies and CEO of Wurldtech Security Technologies
• Held senior positions at TeraSpan, TIR Systems, Mobile Data Solutions, Intrinsyc Software
• Joined board in 2016• Former President and
CIO of CN Rail and Rogers Communications
• Served on advisor board of Compaq Computer and Lotus Development
• Former Chair of the Information Technology Association of Canada (ITAC)
• Joined board in 1999• Recognized expert in
stray light analysis and suppression
• Involved in 275+ stray light analyses, using the APART™ stray light analysis program, which he authored
• Chairman of the Arizona Optics Industry Association
• Joined board in 2001• Former Director of
VSM MedTech • Serves on the teaching
staff for the Department of Emergency Medicine at Louisiana State University
• Member of the Faculty of Medicine of Madigan Army Medical Center
• Joined board in 2016• Co-founder and
managing director of JEC Capital Partners
• Former CFO of Integrated Dynamics Engineering
• Held various roles at PricewaterhouseCoopers
TSXV: PHO
Company Contact:Michael Goldstein
Director & Acting CEOPhoton Control Inc.
Investor Relations:Matt Glover or Najim Mostamand
Liolios Group, Inc.(949) 574-3860
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