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Edited Transcript of TCM.L earnings conference call or presentation 7-Aug-17 1:00pm GMT

Thomson Reuters StreetEvents

Half Year 2017 Telit Communications PLC Earnings Call

Aug 13, 2017 (Thomson StreetEvents) -- Edited Transcript of Telit Communications PLC earnings conference call or presentation Monday, August 7, 2017 at 1:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Miri Segal

* Oozi Cats

Telit Communications PLC - Co-Founder, CEO (Leave of Absence) & Director

* Yosi Fait

Telit Communications PLC - Interim CEO, President, Finance Director & Director

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Conference Call Participants

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* James Simon Sejejs Lockyer

Peel Hunt LLP, Research Division - Analyst

* Paul Treiber

RBC Capital Markets, LLC, Research Division - Associate

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Presentation

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Operator [1]

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Greetings, and welcome to the Telit 2017 Half Year Financial Results Conference Call. (Operator Instructions) As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Miri Segal of MS-IR. Please go ahead, Ms. Segal.

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Miri Segal, [2]

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Thank you, operator. Good day, everyone, and thanks for joining us for Telit Communications' 2017 First Half Financial Results Conference Call. Joining us today on the call are Mr. Oozi Cats, CEO; and Mr. Yosi Fait, President and Finance Director. Following the prepared statements by management, we will open the call to the question-and-answer session. Please note that an updated company's presentation, including the financial results, is available on our IR website, and we invite you to review the slides during and after the call.

I would like to remind our listeners that comments made today will contain forward-looking statements, and management may make additional forward-looking statements in response to your questions. Such written and oral disclosures are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. The results presented today include results that are on a non-GAAP basis. A full reconciliation table of the non-GAAP results to IFRS measures can be found in the company press release issued earlier today.

And with that, I'd like to hand the call over to Oozi Cats, CEO of Telit. Oozi, please go ahead.

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Oozi Cats, Telit Communications PLC - Co-Founder, CEO (Leave of Absence) & Director [3]

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Thank you, Miri, and thank you all for dialing in. Good afternoon, and good morning to all our European and U.S. investors and analysts. Today, we've announced our half year results in which we have achieved solid growth of 6.9% to $177.6 million, up from $166.1 million in the first half of 2016. As expected, we see our financial performance heavily weighted to the second half of the financial year, and we are still targeting another year of double-digit revenue growth.

Before I go into further detail, I would like to highlight a number of financial and operational areas from H1 2017. Our IoT Services business, in which we continued to invest significantly, continued to see notably strong revenue growth, up 25.5% to $17.2 million from $13.7 million this time last year. It's clear that increasingly large industrial organizations are looking to deploy international IoT solutions to meet their IoT requirements.

Our products division revenue growth was not as strong as expected, as a result of a number of factors, including delayed U.S. certifications predominantly for LTE Cat-1 with voice over LTE products. This resulted in our profitability dropping in the first half with adjusted EBITDA being $14.7 million, down from $21.4 million.

On to our operational highlights where we are now presenting our operational results in 2 business segments, IoT Products and IoT Services, to better reflect the changing shape of the business. Although the IoT Services business unit is a small part of the Group's revenues, our activities have significantly grown in recent years, and we are focusing more and more on IoT Services and end-to-end IoT solutions as the future differentiator and growth engine for the group. It is -- also increases our forward visibility given its recurrent revenue nature.

Earlier, this year, we acquired ultra-low power WiFi systems and chip and modules for battery and line powered devices from GainSpan, to enhance product portfolio and enrich our device to cloud capabilities. And finally, our automotive business unit within the IoT Products saw the first purchase order from Tesla for all modern fleet cars they produce. I think it would be useful at this juncture to give you a brief reminder of our strategy. Our strategy in recent years has been to focus on development of our IoT Services and end-to-end IoT solutions and device-to-cloud capabilities in order to leverage our best-in-class product portfolio, which following the acquisition of GainSpan now includes Smart WiFi.

GainSpan, as expected, had a negative impact on H1 results. However, after fully integrating the business, we expect this important asset to make a positive contribution in 2018, and to make both a material financial and operational contribution in the longer-term. The combination of products and services needed to deliver end-to-end IoT solutions for global enterprises is now in place. All size companies as well as major corporations around the world are now poised to exploit this connected environment in IoT space to drive down their cost base, improve efficiencies and create new revenue streams.

A key part of our go-to-market strategy is to establish partnerships with global leaders in the IoT industry in industrial space. We are now working with the likes of SAP, Tech Mahindra, Cisco, Oberthur Morpho, a number of MNOs as well as many others. This provide us with access to the biggest enterprises globally on top of the small- and medium-sized customers, which are being managed by our direct sales teams. We will continue to look for acquisition opportunities in the IoT Services space, seeking both complementary technologies and market share.

Turning to our operational divisions. Firstly, IoT Products. As you are probably aware, our models are used in a wide range of applications, in numerous vertical markets and support 7,000 customers. They are set to continue to grow significantly during the next 2 years with substantial IoT projects already in advanced stages around the world. In order to cater to all these verticals, we continue to invest in the development of a wide range of cellular LTE products from the high-end Cat-11 for automotive routers and gateways to Cat 1 for industrial verticals. We are also developing a wide range of Cat-M1 and NB-IoT models. We continue to develop our multi-constellation GNSS and Dead

Reckoning enabled modules. The new GSS variance were released with improved performance, integrated antenna, LNA and DC blocking capacitor. We made significant progress in extending our portfolio of short-range and low-power wide area modules based on Bluetooth, BLE, WiFi and other technologies, tailored to the unique requirements of different verticals. We also continued expanding our automotive portfolio, in particular, our LTE high category modules.

Now on to our IoT Services division. Our IoT Services business continued to focus on enhancing and expanding our IoT service offering and premier managed connectivity as well as a range of complementary value-added service and AEPs. Our IoT portal is designed to enable customers to manage their IoT deployments through a single portal that makes IoT deployments easier and efficient and cuts the time to market. It provides customers with access to data management and facilitates interaction with mobile network operators, dash boarding tools, security and administration. Our IoT platform, deviceWISE integrates any device production assets and remote sensor with web-based and mobile app together with any enterprise resource system, it reduce risk, time-to-market complexity and cost of deploying solutions for monitoring and control, industrial automation, asset tracking and field service operation across all industries and market segments around the world. Our IoT factory solution business unit through deviceWISE connects easily production machines and processors with ERP, MRP and SCADA applications. It provides an easy way to collect, normalize and transport real-time manufacturing data to allow processing for improved uptime, better efficiency, predict failures and improved compliance.

Our IoT remote access platform through secureWISE, has been widely recognized as the leading solution for highly secured remote access. More OEMs are using secureWISE, for secure, configurable, end-to-end remote connectivity to securely connect high-value fab equipment and tooling to better service valuable assets and minimize downtime.

During H1, we celebrated its 100, 300 millimeter fab connected via secureWISE. This is out of a 104 hubs exist worldwide. Our investment in commercializing simWISE in partnership with Oberthur Morpho to streamline the provisioning and subscription management process for next-generation Cat-M and narrowband IoT connectivity, is laying the foundation for reduced provisioning cost and complexity. These initiatives will give our OEM customers and partners increased flexibility and choice of [gear] for mass market, low-cost device deployment.

Turning to our markets. The mega trend in IoT is creating a transformational business philosophy as its profile has grown significantly amongst businesses over the last 2 years. Businesses are now beginning to clearly understand the benefits of IoT across an increasing range of industries. There are a number of independent reports highlighting this phenomenon. The ABI Research report, end-to-end and IoT embedded modules 2016, predicts that the number of units in all cellular technologies to be shipped globally will reach 365 million by 2021, representing a CAGR of 33%. Translated into monetary value, this would be a CAGR of 21% or $4.9 billion in 2021. As far as the IoT services for connectivity and platforms, the industry analyst firm, Machina Research, in its IoT forecast report published in September 2016 claiming that in 2025, cellular will account for 2.2 billion connections, up from 334 million at the end of 2015, representing a CAGR of 21% in the period. The outlook for both the linked and the IoT sector overall, including all industrial sectors, continues to be very encouraging.

Our acquisitions over the past few years have materially enhanced our device to cloud platform and end-to-end solution capabilities, which is a key factor to increased recurring revenue from the IoT Services business unit. We are well positioned to exploit the numerous opportunities developing around the world in growing markets as well as increased recurring revenue with our market-leading position in modules, connectivity, connectivity management and platform-as-a-service as well as our wide range of industry partners. Although we are confident of seeing an increase in recurring revenues and maintaining our double-digit revenue growth in the current financial year, there are some uncertainties, including the timing of certifications for the LTE Cat-1 voice over LTE product, and a handful of large-scale deployment, all of which could be deployed slower than planned.

Our revenue guidance for the financial year to 31st December 2017, is between $400 million to $430 million. We also predict based on already achieved design wins, 15% to 20% growth in the [2018] financial year. Overall, we remain confident in the strong second half performance.

Now let me hand over to Yosi Fait, Telit's President and Financial Director, to present our 2017 half year results in more detail.

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Yosi Fait, Telit Communications PLC - Interim CEO, President, Finance Director & Director [4]

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Thank you, Oozi, and good morning, and afternoon, everyone. I am very pleased to present our financial results for H1 2017. The results for the first half show solid growth in revenues, which increased by 6.9% to $177.6 million, up from $166.1 million in the first half of 2016. As expected, the group's financial performance is weighted to the second half of the financial year, even more so in the current year.

As Oozi said, we are targeting 2017 as another year of double-digit revenue growth, as we expect revenues for the full year to be between $400 million and $430 million, an increase of 8% to 16.1% year-over-year.

Turning to revenue performance across the regions. In the Americas, we increased revenue by 14.1% to $76.8 million, which mainly came from ramping up different programs based on the LTE Cat-1 modules. We saw an increasing demand for the new technologies, including Cat-1 and Cat-1 VoLTE, Voice over LTE. A delay in obtaining U.S. carrier certifications of LTE Cat-1 VoLTE chipsets by a blue chip supplier was the main factor in our reduced revenue growth in this region. The upcoming certifications by leading U.S. carriers of Cat-1 VoLTE chipsets of a blue chip supplier are expected to boost revenues during H2 and in 2018.

In EMEA, which we consider as a mature market, revenues increased by 8.3% to $68.2 million, underlying our strong presence in the region. The prevailing technology is still 2G, and the expected shift in technologies from 2G to LTE, both high-end and low categories in the mid- to long-term, will boast the growth in the region. In APAC, we tripled our revenues during the last 3 years up to $84 million in full year 2016.

During H1 this year, we experienced some delays in key programs that shifted the ramp-up towards H2. This resulted in H1 revenues of $32.6 million, 9% lower than H1 2016. We expect this region to return to double-digit revenue growth in 2018.

I will turn now into the segmental information. The IoT Products business unit generated revenues of $160.4 million, with an operating profit of $12.6 million, which represents a 7.9% operational profit margin compared to $24.1 million in H1 2016. The decline is a result of lower-than-expected revenue growth, a slight decrease in the gross margin and the negative effect of the GainSpan integration. As previously announced, the GainSpan business will continue to negatively affect the operational results during H2. Gross profit generated by IoT Products business unit was $59.2 million, a gross margin of 36.9%. Our IoT Services business unit generated a high-double digit growth in H1 2017 of 25.5% to $17.2 million over $13.7 million in the first half of 2016. Gross profit generated by IoT Services business unit was $10.4 million, reflecting a gross margin of 60.4%. As expected, this business unit continues to record an operating loss of $6.6 million in H1 2017. This result is due to the continued heavy investment in this growing opportunity. We plan to maintain a high level of investment in this business unit and expect to have similar level of growth in the foreseeable future.

Turning to the P&L. Our gross margin in the first half of the year was 39.2%, a decline of 0.9%. The main reasons for the gross margin decline are the shift from 2G and CDMA technologies, both mature technologies with high gross margins to LTE products, which is relatively new technology with lower margin at this stage. These are forecasted to improve as they mature and grow volumes of LTE products. Gross margin was also affected by the delay in certifications of Cat-1 VoLTE, which led us to sell certain customers higher cost LTE Cat-3 VoLTE products at the same selling price as Cat-1 VoLTE products. Gross profit increased by 4.5% to $69.6 million.

Let me now review the operating expenses. Overall, the group is meeting its expectations for operating expenses in H1 and is expecting to meet its operational expenditure expectations for H2. Our gross R&D operating expenses, before capitalization and amortization of internally generated development costs, increased to $35.4 million, 19.9% out of revenues over 17.3% in H1 2016.

The growth in expenditure is mainly due to the acquisition of Stollmann in H1 2016 and GainSpan in H1 2017, and the acceleration in the 4G developments in new automotive projects. We expect gross R&D operating expenses as a percentage of revenues to decline during H2 and in 2018. The amount capitalized in respect to internally generated development assets was $17.9 million, 10.1% of revenues in comparison to H1 2016, $15.3 million, 9.2% of revenues. This figure is mainly related to the development of smart WiFi GainSpan acquisition, 4G product lines for high and low categories, including the Cat-M1 and narrowband IoT, the automotive products and the IoT Services. The amortization of internally generated development assets increased by 80.7% to $8 million and increased from $4.4 million in H1 2016. This increase relates mainly to the release of 3G and 4G products to the market during the course of 2015, 2016 and H1 2017. 59% of capitalized R&D assets are now being amortized, up from 48% in H1 2016.

Selling and marketing expenses increased by $5.2 million to $35.1 million, that represents 19.8% of revenues. The increase is mainly due to the recent acquisitions and the investments in catering, a go-to-market for these businesses, smart Bluetooth and smart WiFi. We expect this expense as a percentage of revenue to decline during H2 and in 2018.

General and administrative expenses increased by $1.4 million to $14.4 million, representing 8.1% of revenues. This increase reflects the continued expansion of our activities. Also, here, we expect G&A as a percentage of revenues to decline during H2 and in 2018.

Net finance costs were $1.9 million, similar to $1.7 million in H1 2016. Following the fund raising completed in May 2017, we expect a decline in interest on loans and overdrafts during H2. Adjusted EBITDA was $14.7 million, down from $21.4 million in H1 2016. Our adjusted EBIT was therefore $1.6 million compared to $13.1 million in H1 2016. The adjusted figures exclude a noncash share-based payment charge of $3.3 million and nonrecurring expenses of $0.7 million, and amortization of intangible acquired assets of $2.4 million. Adjusted basic loss per share was $0.008, and reported diluted loss per share was $0.033. We are not paying an interim dividend and will consider paying a dividend for the year subject to the group's financial position at the year-end.

I will move now to review the main balance sheet items. As at June 30, 2017, net debt was $9.3 million compared to a net debt of $17.7 million in December 2016. The change from 31st of December 2016 is due mainly to $49.7 million raised by capital increase, which was offset by the first half loss and $8 million used for GainSpan acquisition, $6.5 million invested in CapEx, payment of $5.7 million as final dividend for 2016 financial year and an increase in working capital, mainly in the inventory.

Net operating cash flow, before movements in working capital items, was $40 million compared to $21.2 million in H1 2016.

In summary, we believe Telit is well-positioned in the IoT space, with the best-in-class communication technologies and services, well-defined go-to-market strategy to be able to capture a significant share in the fast-growing IoT market across verticals and enterprises. We expect to boost revenues and return to profitability during the second half of the year. We are confident that the overall strategy we have presented during this call will positively be reflected in our results during H2, followed in 2018 and the following years.

Thank you all for joining us today.

I will now transfer the call back to the operator for the Q&A session.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question is from the line of Paul Treiber with RBC.

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Paul Treiber, RBC Capital Markets, LLC, Research Division - Associate [2]

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I was just hoping you could speak to the linearity of revenue for -- through the first half of the year, just concerning that on the trading update on April 25, it appeared everything was in line with expectations. And so did the delay in certification occur sometime in May and June, and was a sizable product -- a product that you couldn't ship towards the end of the half?

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Yosi Fait, Telit Communications PLC - Interim CEO, President, Finance Director & Director [3]

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Paul, it's Yosi. Basically, our budget for the first year was not far away from where we ended up. Our budgets from the first place was leaned significantly to H2. We missed something like $12 million in revenues. As you can see, we have been optimistic and rebuilding our inventory to support the sales of around $190 million, while reaching only $178 million, unfortunately. And so the delta is coming from different delays in different accounts. The delay in the chipset of LTE Cat-1 VoLTE, which unfortunately was promised to be ready months after months after months. And now, the scenario is most probably, it will be ready during August. So for all those internal plan, which consists of about $430 million for the full year, and $190 million for H1, what we missed is $12 million that are unluckily are now in our inventory.

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Paul Treiber, RBC Capital Markets, LLC, Research Division - Associate [4]

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Okay. That's helpful. Just in regards to certification expected in August, could you elaborate on potential reasons for the delay and your confidence in having the certification complete in August? And then are there other potential suppliers you could possibly use?

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Yosi Fait, Telit Communications PLC - Interim CEO, President, Finance Director & Director [5]

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You must remember the big restructuring Intel did. I think, it was 18, 24 months ago, laying off 10% of Intel employees. Then the -- they started -- it started with delays on Cat-1 and not Cat-1 VoLTE, only the Cat-1. You remember our H2 '15, which was also a weak one because of that reason at that point of time, recovering thereafter in 2016 when the Cat-1 was older. Now same story with VoLTE. Many of our customers are in the security vertical. This vertical is using -- it needs to use VoLTE. They're all waiting to redeploy and rush and deploy more based on this product. And we took decision to work with Intel, to work with Voltaire. Unfortunately, our bet on them was not good enough, and we failed to get the product on time. Hopefully this time, almost looks like it's really going to happen, but let's see.

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Paul Treiber, RBC Capital Markets, LLC, Research Division - Associate [6]

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Okay. The -- in regards to the financing, potential use of proceeds was on potential acquisitions. Do you have -- how is that process progressing? How is your funnel looking? What type of businesses -- IoT Services businesses are you looking at?

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Yosi Fait, Telit Communications PLC - Interim CEO, President, Finance Director & Director [7]

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Yes. We have -- the process is moving very, very fast. We are looking at many things, mainly in IoT Services, of course. These things are from IoT connectivity, small MVNOs with revenues. We are not looking to buy small stuff for only technologies, as we did in the past, and not loss-making businesses. We are looking to buy some healthy, growing businesses in the IoT Services space, like connectivity business. In factory solution space, we have some opportunities in the location services, et cetera. So we are very much focused, looking in many opportunities. We have opportunities in different levels, different stages from meeting introduction to more comprehensive due diligence. We are targeting to do something during the second half of the year. But this is acquisition. This is [binaric], or it will happen or it won't happen. We are doing all we can to do to have something significant and profitable, that will increase our IoT Services business inorganically.

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Paul Treiber, RBC Capital Markets, LLC, Research Division - Associate [8]

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Okay. Just one last one for me. Just in regards to automotive, you announced a nice win with Tesla. Generally speaking, the automotive segment is quite competitive. I mean, pricing is quite intense. How do you look at the automotive segment? How do you pursue deals in that space?

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Yosi Fait, Telit Communications PLC - Interim CEO, President, Finance Director & Director [9]

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I suggest -- Oozi, I suggest you take this question, please.

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Oozi Cats, Telit Communications PLC - Co-Founder, CEO (Leave of Absence) & Director [10]

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Sure. Paul, we have grown our automotive business quite nicely in the last few years, and we are having actually a good year this year as well, and 2018 look very bright, obviously, including Tesla, which helped quite a bit. It is true your statement about margins, gross margins in the automotive. We always said that they fall quite lower than our average. So if our average on hardware is trending towards 40%, then automotive is always on around 30%. And actually, what balance that up is our platform-as-a-service, which is around 60%. So no change there. And Tesla falls right well into the already well-known numbers in our automotive business.

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Operator [11]

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Our next question is from the line of [Shahar Cohen] with [Lucid] Capital.

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Unidentified Analyst, [12]

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Hi Oozi and Yosi. Regarding IoT services, we have seen both margin declines very, very close to the 60%. And Oozi, in the last call, you mentioned that 60% should be the lower boundary, if we look ahead. And also, the growth pace was decelerated. So is there any concerning trend there that we should be aware of?

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Yosi Fait, Telit Communications PLC - Interim CEO, President, Finance Director & Director [13]

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It's Yosi. I will answer your question. Yes, our gross margin for the IoT Services declined from about 60% -- 75%. If I recall correctly, to 60%, in H1 '16 to 60% this report. I don't think this is something we should be bothered about. Still a bigger chunk of our revenues is coming from one-time NREs working with customers to create their solution. This NRE fees are generating the future recurring revenues, of course, the connected devices, they're per month per device. So this half, we had some impacts on our margin from some big one-times, that will be converted in the future to be recurring revenues. So we believe still that our connectivity business was around 50% margin, and our software business platform portal was about 80% margin. The 65% for the long term is the right assumption.

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Unidentified Analyst, [14]

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Okay. And one further question about the marketing expenses, sales and marketing. We -- in the previous call, you communicated that you see increase in the R&D expenses following the GainSpan, et cetera. But this half, we saw a major uptick of 20% year-over-year of this S&M, though in the last call, I think, Oozi mentioned that you're going -- the S&M is going to be lower this year. So what happened there?

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Oozi Cats, Telit Communications PLC - Co-Founder, CEO (Leave of Absence) & Director [15]

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Yes. It's Oozi. Just to take you on this one. Look, the cost increase we have in Telit, due to GainSpan acquisition beginning of 2016 or actually mainly second half of '16, because it was brought during April. And -- sorry Stollmann acquisition in '16 and GainSpan in the beginning of this year. The annualized additional cost is about $13 million. Now that is mainly divided between R&D and technical sales. Don't think about sales and marketing on a very generic aspect. Technical sales means the people that actually are doing the design in with the customer, that is a process of about 1.5 years on BLE and low-power WiFi. And the R&D guys are the people that are actually developing the products and the platform to begin with. So it's a little bit misleading thinking about the sales item as sales efforts trying to find customers, rather than this is a very technical work that is being done. And you should look at them more in conjunction, rather than separate.

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Unidentified Analyst, [16]

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Okay. And how should we think about the S&M looking to H2 and 2018?

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Yosi Fait, Telit Communications PLC - Interim CEO, President, Finance Director & Director [17]

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You should expect the decline starting in H2 because the S&M -- and generally, our OpEx in H2 should be similar to the one we had in H1. So as expected in revenue growth in H2, we will see a decline -- a significant decline. And in 2018, as we mentioned, our confident in 15% growth that year. And no plan to increase cost, again. We should see a fall in the numbers during '18.

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Oozi Cats, Telit Communications PLC - Co-Founder, CEO (Leave of Absence) & Director [18]

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Want to add into that and say that my biggest debate every night now is, should I actually restructure the cost of Telit and avoid a 10% of it by releasing 10% of human resources where 1,100 people, or be brave enough to actually lead the company into the growth numbers that we see in 2018, while actually freezing the cost. So 2 alternatives: Either the cost you see right now thanks to -- this is the yearly cost pretty much and should not be accepted -- expected to change in 2018. So this is frozen. And therefore, any revenue increase minus -- obviously, the COGS falls down into EBITDA, EBIT and PBT. That basically the 2 options we have. And therefore, if there would be growth, as we believe there will be, then all those factors will improve because no additional cost will be put in place.

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Operator [19]

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(Operator Instructions) Our next question is coming from the line of James Lockyer with Peel Hunt.

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James Simon Sejejs Lockyer, Peel Hunt LLP, Research Division - Analyst [20]

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Hi Oozi and Yosi. I just have a couple of questions for you, please. If you could talk more about your factory solution, such as where you see it going? And what you think the addressable market is? And a bit more around your end-to-end IT solution customers that you've gained over the period?

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Yosi Fait, Telit Communications PLC - Interim CEO, President, Finance Director & Director [21]

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Thank you. Who is this, by the way? Who was asking the question?

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Oozi Cats, Telit Communications PLC - Co-Founder, CEO (Leave of Absence) & Director [22]

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James.

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James Simon Sejejs Lockyer, Peel Hunt LLP, Research Division - Analyst [23]

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It's James Lockyer at Peel Hunt.

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Yosi Fait, Telit Communications PLC - Interim CEO, President, Finance Director & Director [24]

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James, a general statement about factory solutions, this is a business line, which is running through the industry 4.0 revolution, which is fourth Industrial Revolution talking about -- making the entire world, the whole physical world connecting production with the consumer and making everything more efficient in order to increase profits. Telit was buying ILS Technology back in September 2013 as the platform. These guys, which were spinned-off from IBM in 2000, were developing over almost 30 years, a second-to-none platform that can connect factory lines, PLCs, robots, machines, collect the data, push it through the enterprise systems and push the instructions back to the production line. Back on this acquisition, with an experience of 30 years, we have invested heavily converting this great platform to be also an IoT platform. So now we are running with this platform basically 2 lines of business. The first one is connecting factories and we see a very strong demand of the big guys running 40 factories, 90 factories, over 100 factories to connect, collect the Big Data and make their production more efficient. And we see a lot of market differentiators in our product. We recently gained one of the biggest pharmaceutical customers, which I unfortunately, I cannot name his name at this stage, competing with all the big guys in the market between the Siemens and the Rockwells and the PTCs of the world. So we are gaining a lot of traction and we have a very nice success because our software is very easily connected to the different PLCs from one end and to different -- to the different enterprise systems between the SAPs, Oracle, IBM, Microsoft Azure, whatever it is on the other end. So the customer is getting ready to use software, no need for coding or tough implementation. The other line we run under the factory solution is the secureWISE, which is a secured platform, which enables companies that are building OEMs, building very expensive machines for the fabs, machines of $50 million value or $100 million value, to be able to remotely access this machines and help their customers maintain no downtime or minimal downtown as possible, and to have the best expert sitting everywhere in the world the ability to access the factory from remote in a very, very secure way. Also, in this business line, we see a very strong traction as IoT is getting bigger. I thought -- I think I answered all your question or I missed something?

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James Simon Sejejs Lockyer, Peel Hunt LLP, Research Division - Analyst [25]

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No, no, that's fine.

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Oozi Cats, Telit Communications PLC - Co-Founder, CEO (Leave of Absence) & Director [26]

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Yosi, I would like to add. It's always quite difficult to announce the names, but we did have a great first half of the year in terms of winning new contracts. You could see in one of our announcements, that we won actually an automotive OEM that we already been installed since 2013, they decided to deploy 19 of their U.S. factories now with our deviceWISE. And it's clearly described, including the brand in our presentation. So you are welcome to look at the presentation and see who it is. We announced another Tier 1 player that gave us basically a mandate to deploy 30 of their factories, one of the biggest Tier 1s in the world for OEMs. Also, we signed a deal with a huge blue chip, which will be jointly announced in IoT Mobile World Congress, Barcelona on October 2. We will have a very significant announcement there with a very significant blue chip player, where is forecasted by 2020, to help millions of devices on our platform.

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Operator [27]

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Our next question is a follow-up from the line of [Shahar Cohen] with [Lucid] Capital.

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Unidentified Analyst, [28]

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Two questions. A, we have seen Sierra acquired Numerex a few days ago, to what extent do you expect that to affect your business, if at all? Second one, are there a plan to register Telit in the main list in London is still invalid for the first half of 2017 on NASDAQ?

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Oozi Cats, Telit Communications PLC - Co-Founder, CEO (Leave of Absence) & Director [29]

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Yosi, are you taking this? You want me to take the first one?

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Yosi Fait, Telit Communications PLC - Interim CEO, President, Finance Director & Director [30]

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Okay, I will. About Numerex, we have been looking at this company. They were on the shelf for a very long time. We were looking at this company and at certain stage, when we understood what they have, we ducked decision not to continue, not to pursue this opportunity. Because of many reasons, I will not go into it because it's all under NDA and information we got through the review we did, but we decided it's not for Telit. It will not give us anything for the future we are looking for, except of maybe significant revenue of about $70 million, and maybe a nice EBITDA through the synergies. But since we are managing our business from strategic point of view and want to be very, very focused in what we do, we thought this is not the right acquisition for us, so we stepped out. And about the second question was about the --

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Oozi Cats, Telit Communications PLC - Co-Founder, CEO (Leave of Absence) & Director [31]

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London stock exchange, main market.

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Yosi Fait, Telit Communications PLC - Interim CEO, President, Finance Director & Director [32]

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Yes, yes. So our next opportunity to move to the main market will be first half of 2018. I think that generally, we graduated, we deserve to be there. And the board will need to take a decision about that, whether we do the move at the first half of 2018, post audited reports that we will publish somewhere in March, or not -- I -- my feeling is that, it might be a positive decision this time.

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Oozi Cats, Telit Communications PLC - Co-Founder, CEO (Leave of Absence) & Director [33]

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I would like also to add to the Numerex. Actually, Sierra Wireless deserve the credit for this deal. This deal suits Sierra far better than Telit. You have to understand that Numerex basically have 2 main businesses, which is tank monitoring and mainly security. Those 2 businesses are basically selling boxes and certain service for them. That would be actually competing significantly with those 2 lines of business that we have with our customers. We are by far the largest player on security. And all my customers would see basically us competing with them if we have taken that business on board. Sierra on the other hand, has far smaller business on telematics or telemetry in monitoring and security. And therefore, it more -- it fits better for their earnings.

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Operator [34]

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Thank you. Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may now disconnect your lines at this time.