On target for FY17 profitability

NetDimensions (Holdings) 19 September 2016 Update

NetDimensions (Holdings)

On target for FY17 profitability

Interim results

Software & comp services

19 September 2016

Price

38p/$2.45*

Market cap

£19m/$25m

$1.30$/£

*ADR price

Net cash ($m) at 30 June 2016

11.2

Shares in issue

51.2m

Free float

78%

Code

NETD/NETDY

Primary exchange

AIM

Secondary exchange

OTCQX (ADR 5:1)

Share price performance

%

1m

3m

12m

Abs

7.9

(36.6)

(50.3)

Rel (local)

10.2

(43.6)

(53.7)

52-week high/low

76.50p

33.50p

Business description

NetDimensions provides talent and learning management systems (LMS) to global enterprises. The company’s solutions allow organisations to deliver personalised learning, share knowledge, enhance performance, foster collaboration and manage compliance for employees, customers, partners and suppliers.

Next events

Q3 trading update

October 2016

Q4 trading update

January 2017

Final results

April 2017

Analysts

Richard Jeans

+44 (0)20 3077 5700

Dan Ridsdale

+44 (0)20 3077 5729

NetDimensions (Holdings) is a research client of Edison Investment Research Limited

While NetDimensions (AIM: NETD, OTCQX: NETDY) announced a modest reduction in H1 revenue due to a decline in services and support, this masked an 8% improvement in high-margin licence revenues to $6.8m. Costs fell dramatically, enabling a sharp reduction in the EBITDA loss. New business is increasingly lumpy as the group targets large enterprises in high-consequence industries and we have conservatively eased our numbers. Nevertheless, the quality of business continues to improve with the emphasis on recurring software rental revenue. Following the recent decline, the shares look attractive, given the $11.2m cash position (c 16.5p per share), an attractive growth profile, the cash-generative business model and an EV/sales rating at just 0.4x.

Year
end

Revenue ($m)

PBT*
($m)

EPS*
(c)

DPS
(c)

P/E
(x)

Yield
(%)

12/14

22.7

(3.5)

(9.4)

0.9

N/A

1.8

12/15

25.4

(0.7)

(2.2)

0.9

N/A

1.8

12/16e

26.6

(0.4)

(0.6)

1.0

N/A

2.0

12/17e

31.5

1.2

1.7

1.1

29.3

2.2

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments. P/E and yield calculated in pence.

Interim results: High-margin licence revenue up 8%

Group revenue slipped by 1% to $10.5m but costs fell, enabling the group to reduce its EBITDA loss by 58% to $0.8m. Secure SaaS revenue lifted by 6% to $5.4m, while software licensing (mostly onsite rental) rose by 11% to $1.3m. Services revenues were weaker due to the delay in roll-outs highlighted in the July trading update, while the de-emphasising of perpetual licences led to a 33% decline in support and maintenance revenue. Invoiced sales to clients in high-consequence industries represented 91% of total invoiced sales. The group is becoming increasingly specialised on a select few verticals including precision engineering (especially automotive) and healthcare, with the latter growing by 11%. The group generated $0.3m in H1 gross operating cash flow and modestly positive free cash flow, but the net cash position dipped by $0.8m to $11.2m over the six months, due to the decline in sterling as the group has significant GBP deposits.

Forecasts: Conservatively eased

We have conservative eased our revenue forecasts by $0.4m in FY16, $0.5m in FY17 and $0.6m in FY18. We have tweaked the gross margin forecast upwards, while conservatively increasing operating expenses, which results in operating profit falling by $0.4m in FY16 (to a $0.4m loss) and by $0.2m in each of FY17 and FY18. We forecast the group to end the year with $10.7m cash (previously $11.1m), which rises to $11.7m a year later (previously $12.2m).

Valuation: High-growth sector with punchy valuations

If NETD can manage the growth effectively, we continue to see significant upside, as the shares trade on an EV of 0.4x our FY17e revenues, compared to the group’s larger US peers (its key competitors), which typically trade at 2.7-6.8x revenues.

Interim results: High-margin software shows growth

Group revenue slipped by 1% to $10.5m. However, within the mix, the key Secure SaaS revenue lifted by 6% to $5.4m, while software licensing (annual licences – effectively onsite rental) rose by 11% to $1.3m. Services revenues slipped by 6% to $3.2m due to the delay in roll-outs highlighted in the July trading update. The group has been de-emphasising legacy perpetual licences for several years and this led to a 33% decline in support and maintenance revenue to $0.6m. Recurring revenue (SaaS, annual licence and support) represented 70% of total revenue. The revenue slowdown is a disappointment for the company and we understand the focus on developing larger accounts has led to some distraction from selling the group’s “off-the-shelf” product to smaller customers that do not require customisation. We note that the group currently has 16 quota-carrying sales people, along with regional hands and relationship managers.

The group gross margin rose by 410bp to 85.0% largely due to the increase in high-margin software licensing revenues (ie the software licensing revenue plus hosting services) in the revenue mix, while operating costs (before depreciation) fell by 7% to $9.7m. In July we noted that expenses had been tightly controlled due to a significant slowdown in new hires, which was below budget. This enabled the group to reduce its EBITDA loss by 58% to $0.8m. We note the software licensing revenue line represents annual licences, which represents onsite installations of the software that are typically sold for a period of three years. It also used to include perpetual licences, which are de-emphasised and hence very rarely sold, and legacy perpetual installations are reflected in the support and maintenance revenue line. Hosting services represents the group’s Secure SaaS product, which is a fully hosted solution and supported by the ISO 27001 security standard.

In its July trading update, the group reported that revenue for the period was broadly unchanged from H115, while the adjusted EBITDA loss for the period was less than $1m. We said we understood that the company has received open purchase orders for significant annual on-premise licences. However, due to delays in the roll-outs, it has not been able to recognise the revenue or cash flow. We note that the group has been winning increasingly larger customers and these customers have increasingly complex services requirements. This typically involves complex customisation and data migration is also an issue, with data from as many as 20 systems transitioning to the NetDimensions platform. The roll-outs can be lengthy and complex, across multiple countries, languages and across a high level of users. This can lead to delays.

Exhibit 1: Half-by-half analysis

US$000s

H115

H215

FY15

H116

H216e

FY16e

FY17e

Software licensing

1,211

4,679

5,890

1,343

3,153

4,496

7,046

Hosting services

5,127

5,323

10,450

5,445

6,390

11,835

13,220

Support and maintenance

890

690

1,580

551

1,186

1,738

1,722

Professional services

3,364

4,106

7,470

3,152

5,417

8,569

9,522

Total revenue

10,592

14,804

25,396

10,492

16,146

26,638

31,509

Cost of sales

(2,021)

(2,172)

(4,193)

(1,576)

(2,812)

(4,388)

(4,871)

Gross profit

8,571

12,632

21,203

8,915

13,335

22,250

26,638

Gross Margin

80.9%

85.3%

83.5%

85.0%

82.6%

83.5%

84.5%

Opex before depreciation

(10,461)

(11,242)

(21,704)

(9,709)

(12,744)

(22,453)

(25,183)

Adjusted EBITDA

(1,890)

1,390

(501)

(794)

591

(203)

1,455

Dep'n & s/w amortisation

(121)

(89)

(210)

(97)

(134)

(231)

(262)

Adjusted operating profit

(2,011)

1,301

(710)

(890)

591

(434)

1,194

Operating Margin

(19.0%)

8.8%

(2.8%)

(8.5%)

3.7%

(1.6%)

3.8%

Net interest

(0)

(14)

(15)

(0)

25

25

25

Edison Profit Before Tax (norm)

(2,011)

1,287

(725)

(891)

616

(409)

1,219

Amortisation of acquired intangibles

(236)

(252)

(488)

(152)

(152)

(304)

(304)

Share-based payments

(87)

(291)

(377)

(317)

(58)

(375)

(400)

Exchange movements

(155)

(165)

(319)

169

(169)

0

0

Exceptional items

0

0

0

0

0

0

0

Profit before tax (FRS 3)

(2,489)

580

(1,909)

(1,191)

237

(1,088)

514

Source: NetDimensions accounts, Edison Investment Research

Forecasts: Conservatively eased

We have conservative eased our revenue forecasts by $0.4m in FY16, $0.5m in FY17 and $0.6m in FY18. We have tweaked the gross margin forecast upwards, while conservatively increasing operating expenses, which results in operating profit falling by $0.4m in FY16 (to a $0.4m loss), and by $0.2m in each of FY17 and FY18. We forecast the group to end the year with $10.7m cash (previously $11.1m), which rises to $11.7m a year later (previously $12.2m). We have also reduced the amortisation of acquired intangibles to H116 levels going forward.

We believe our forecasts are conservative, particularly operating costs, which we forecast will be $3m higher in H2, mainly due to the increased sales and marketing activity in the period. Nevertheless, while a busy Q4 performance could potentially boost the FY16 results if annual licences or perpetual licences are sold, the increasing focus on recurring Secure SaaS rental revenues means that a strong new business performance in Q4 will not necessarily boost FY16 numbers.

Exhibit 2: Forecasts

Revenues ($'000s)

2013

2014

2015

2016e

2017e

2018e

Software licensing

3,673

5,381

5,890

4,496

7,046

7,617

Hosting services

6,072

8,279

10,450

11,835

13,220

14,612

Support and maintenance

2,433

2,644

1,580

1,738

1,722

1,757

Content, implementation and customisation

4,030

6,397

7,470

8,569

9,522

10,524

Group revenue

16,208

22,701

25,396

26,638

31,509

34,509

Growth (%)

17.5

40.1

11.9

4.9

18.3

9.5

Gross Profit

14,622

18,699

21,203

22,250

26,638

29,173

Gross margin (%)

90.2

82.4

83.5

83.5

84.5

84.5

Operating expenses

(18,893)

(22,230)

(21,913)

(22,684)

(25,444)

(26,589)

Adjusted operating profit

(4,272)

(3,531)

(710)

(434)

1,194

2,584

Operating margin (%)

(26.4)

(15.6)

(2.8)

(1.6)

3.8

7.5

Growth (%)

(1,566.0)

(17.3)

(79.9)

(38.9)

(375.0)

116.5

Net interest

65

25

(15)

25

25

25

Profit before tax norm

(4,207)

(3,507)

(725)

(409)

1,219

2,609

Amortisation of acquired intangibles

(477)

(472)

(488)

(304)

(304)

(304)

Share based payments

(266)

(674)

(377)

(375)

(400)

(425)

Exchange movements

4

(364)

(319)

0

0

0

Profit before tax

(4,946)

(5,016)

(1,909)

(1,088)

514

1,880

Taxation

(0)

(124)

(193)

115

(341)

(731)

Net income

(4,946)

(5,141)

(2,102)

(974)

173

1,149

Adjusted EPS (c)

(12.4)

(9.4)

(2.2)

(0.6)

1.7

3.5

Adjusted EPS (p)

(9.4)

(7.2)

(1.7)

(0.4)

1.3

2.7

P/E - Adjusted EPS

N/A

N/A

N/A

N/A

29.3

13.9

Source: NetDimensions accounts, Edison Investment Research

Exhibit 3: Forecast changes

Revenues ($m)

Adjusted operating profit ($m)

EPS (c)

Old

New

% change

Old

New

% change

Old

New

% change

2016e

27.0

26.6

(1)

0.0

(0.4)

N/A

0.0

(0.6)

N/A

2017e

32.0

31.5

(2)

1.4

1.2

(14)

2.0

1.7

(15)

2018e

35.1

34.5

(2)

2.7

2.6

(4)

3.8

3.5

(8)

Source: Edison Investment Research

Valuation: High-growth sector with punchy valuations

We compare the stock with its listed US competitors and UK peers, which are not direct competitors (except for Access Intelligence, which has an LMS solution). NetDimensions’ stock trades on 0.4x our FY17 revenue forecast, which is well below its UK peers, and just a fraction of its US peers. This is in spite of NetDimensions’ very good track record of profitability and cash generation before the accelerated investment in 2013.

Exhibit 4: Peer valuations

Share price

Market cap

EV/sales (x)

EV/EBITDA (x)

P/E (x)

m

Year 1

Year 2

Year 1

Year 2

Year 1

Year 2

NetDimensions (£)

37.75p

19.3

0.5

0.4

N/A

9.2

N/A

29.3

1) North American Human Capital Management software peers ($'m)

Callidus Software

18.725

1164

5.2

4.4

41.4

32.0

67.4

51.2

Cornerstone OnDemand

44.07

2465

5.7

4.7

78.6

45.1

3672.5

158.5

Halogen Software (C$)

10.18

219

1.8

1.6

29.2

21.8

N/A

N/A

HealthStream

26.4

838

3.1

2.7

19.9

15.2

88.0

58.9

Paycom Software

48.73

2915

8.8

6.8

33.9

26.3

63.2

51.0

Paylocity

42.285

2163

7.0

5.5

54.1

40.3

115.5

83.9

Ultimate Software

205.6

5950

7.5

6.1

30.9

24.6

62.5

50.4

Workday

88.53

17617

10.3

7.9

127.1

92.4

N/A

275.8

Medians

6.3

5.1

37.7

29.1

77.7

58.9

2) Human Capital Management software peers quoted on AIM (£'m)

Access Intelligence

5.125

15

N/A

N/A

N/A

N/A

N/A

N/A

Bond Intl Software

108.5

46

N/A

N/A

N/A

N/A

N/A

N/A

Dillistone Systems

83.5

16

1.5

1.5

6.1

5.8

13.3

12.3

EG Solutions

54

11

0.9

0.7

5.6

3.9

23.5

11.0

Learning Technologies

30.5

128

4.6

3.9

18.3

15.6

27.7

21.8

ServicePower

2.625

6

0.4

0.3

9.1

5.1

N/A

26.3

Tracsis

530

147

4.4

3.9

18.8

16.8

26.1

23.2

Medians

1.5

1.5

9.1

5.8

24.8

21.8

Source: Edison Investment Research, Bloomberg. Prices as at London close on 16 September 2016.

Exhibit 5: Financial summary

US$'000s

2013

2014

2015

2016e

2017e

2018e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

16,208

22,701

25,396

26,638

31,509

34,509

Cost of Sales

(1,586)

(4,002)

(4,193)

(4,388)

(4,871)

(5,336)

Gross Profit

14,622

18,699

21,203

22,250

26,638

29,173

EBITDA

 

 

(4,105)

(3,335)

(501)

(203)

1,455

2,913

Adjusted Operating Profit

 

 

(4,272)

(3,531)

(710)

(434)

1,194

2,584

Amortisation of acquired intangibles

(477)

(472)

(488)

(304)

(304)

(304)

Exceptional items and exchange movements

4

(364)

(319)

0

0

0

Associates and joint ventures

0

0

0

0

0

0

Share based payments

(266)

(674)

(377)

(375)

(400)

(425)

Operating Profit

(5,011)

(5,041)

(1,894)

(1,113)

489

1,855

Net Interest

65

25

(15)

25

25

25

Profit Before Tax (norm)

 

 

(4,207)

(3,507)

(725)

(409)

1,219

2,609

Profit Before Tax (FRS 3)

 

 

(4,946)

(5,016)

(1,909)

(1,088)

514

1,880

Tax

()

(124)

(193)

115

(341)

(731)

Profit After Tax (norm)

(4,207)

(3,631)

(918)

(294)

878

1,878

Profit After Tax (FRS 3)

(4,946)

(5,141)

(2,102)

(974)

173

1,149

Average Number of Shares Outstanding (m)

33.8

38.5

40.8

51.6

52.3

53.2

EPS - normalised (c)

 

 

(12.4)

(9.4)

(2.2)

(0.6)

1.7

3.5

EPS - FRS 3 (c)

 

 

(14.6)

(13.3)

(5.2)

(1.9)

0.3

2.2

Dividend per share (c)

0.99

0.90

0.90

1.00

1.10

1.20

Gross Margin (%)

90.2

82.4

83.5

83.5

84.5

84.5

EBITDA Margin (%)

(25.3)

(14.7)

(2.0)

(0.8)

4.6

8.4

Operating Margin (%)

(26.4)

(15.6)

(2.8)

(1.6)

3.8

7.5

BALANCE SHEET

Fixed Assets

 

 

3,980

3,359

3,019

2,803

2,615

2,395

Intangible Assets

3,522

3,059

2,591

2,286

1,982

1,677

Tangible Assets

316

270

260

349

465

550

Other

142

30

168

168

168

168

Current Assets

 

 

15,031

13,104

21,011

20,166

22,904

25,973

Stocks

0

0

0

0

0

0

Debtors

7,303

8,197

9,030

9,472

11,204

12,271

Cash

7,728

4,907

11,981

10,694

11,700

13,702

Current Liabilities

 

 

(10,673)

(12,476)

(11,830)

(12,050)

(14,144)

(15,610)

Creditors

(10,671)

(12,473)

(11,826)

(12,045)

(14,140)

(15,606)

Short term borrowings

(2)

(2)

(4)

(4)

(4)

(4)

Long Term Liabilities

 

 

(113)

(182)

(80)

(80)

(80)

(80)

Long term borrowings

(6)

(3)

(14)

(14)

(14)

(14)

Other long term liabilities

(106)

(179)

(65)

(65)

(65)

(65)

Net Assets

 

 

8,225

3,805

12,120

10,840

11,295

12,679

CASH FLOW

Operating Cash Flow

 

 

(2,514)

(2,085)

(2,349)

(432)

1,793

3,296

Net Interest

65

25

(15)

25

25

25

Tax

(31)

(57)

(148)

(193)

82

(329)

Capex

(256)

(144)

(205)

(320)

(378)

(414)

Acquisitions/disposals

(2,242)

(258)

0

0

0

0

Equity financing

6,133

250

10,553

0

0

0

Dividends

(287)

(389)

(374)

(367)

(516)

(576)

Net Cash Flow

868

(2,658)

7,464

(1,287)

1,006

2,002

Opening net debt/(cash)

 

 

(6,814)

(7,719)

(4,902)

(11,963)

(10,676)

(11,681)

Other

37

(160)

(403)

0

0

0

Closing net debt/(cash)

 

 

(7,719)

(4,902)

(11,963)

(10,676)

(11,681)

(13,684)

Source: NetDimensions accounts, Edison Investment Research

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Copyright 2016 Edison Investment Research Limited. All rights reserved. This report has been commissioned by NetDimensions (Holdings) and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2016. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

Edison, the investment intelligence firm, is the future of investor interaction with corporates. Our team of over 100 analysts and investment professionals work with leading companies, fund managers and investment banks worldwide to support their capital markets activity. We provide services to more than 400 retained corporate and investor clients from our offices in London, New York, Frankfurt, Sydney and Wellington. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2016 Edison Investment Research Limited. All rights reserved. This report has been commissioned by NetDimensions (Holdings) and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2016. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

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