Full Year Results 2017

8 March 2018

1

Presentation team

Anthony was the founder and CEO of

Frontier Silicon Ltd, the leading supplier of

digital broadcast, network audio products

and Smart Audio devices. From 2001, he

successfully grew the business and

established Frontier Silicon as a strategic

supplier of digital audio chips and modules

to global consumer electronic brands.

Prior to that, Anthony was Executive

Director of Consumer & Mobile Phone

Products at Amstrad PLC, Sales and

Marketing Director at Samsung (UK) Ltd,

and Chief Commercial Officer of ONDigital

(British Digital Broadcasting Ltd).

Anthony Sethill

Chief Executive Officer

Jonathan has over 18 years’ experience

as a finance director. He was CFO of

Europe’s largest independent WiFi

operator, The Cloud Networks, for over

four years prior to a trade sale to Sky.

Jonathan was previously CFO of

interactive TV, mobile and internet

content producer YooMedia, CFO at

AIM listed technology venture capital

fund E-capital Investments, and

European Finance Director at network

integrator EQUANT Integration

Services. Jonathan is a qualified

chartered accountant and has a

Bachelor of Commerce degree from

Birmingham University.

Jonathan Apps

Chief Financial Officer

2

Highlights FY2017

Financial

• Revenues up 28% to £41.0m (FY2016: £32.1m)

• EBITDA* up 171% to £1.9m (FY2016: £0.7m)

• R&D expenditure stable at £6.5m (FY2016: £6.6m)

• As of 31 December 2017, the Group’s gross cash balance was £5.9m; the net cash balance was £3.0m

Operational

highlights

• Strong performance in Radio, especially in H1, driven by switch-off of FM radio in Norway plus steady

growth in other European markets

• In Smart Audio, over 20 models released incorporating the Group’s solution with Google Chromecast

• Working demonstrations of Frontier’s Smart Audio solutions, incorporating Google’s Voice Assistant,

Amazon’s Alexa Voice Services and Apple AirPlay 2, presented at CES in January 2018

• Ten design wins secured for devices incorporating Frontier’s Smart Audio solution with Google’s Voice

Assistant – products to be released in 2018

FY2018

Outlook

• The Board expects modest growth in revenues and EBITDA, as the Group continues to invest in Smart

Audio

* Earnings before interest, tax, depreciation, amortisation and before share based payments

3

Frontier: a pioneer in consumer audio technologies

Radio

• Digital Radio

• Advanced Radio

Smart Audio

• Google

• Amazon

• Apple

• #1 provider of consumer DAB Digital and

Advanced Radio solutions

• World leading technology (silicon, hardware,

software, customer support)

• 2017 revenues: up 15% to £36.3m (FY2016:

£31.7m)

• Positive cashflows

• Hardware and software for cloud connected /

voice recognition audio devices

• Working with Google, Amazon and Apple as

solution provider for 3rd party brands

• 2017 – first material revenues: £4.7m (FY2016:

£0.5m)

- growing number of design wins, including for

voice-enabled devices

4

Strategic objectives 2018-20

Radio

• DAB Radio

• Advanced Radio

Smart Audio

• Google Voice

• Amazon Alexa

• Apple AirPlay 2

Smart Home

• Home appliances

• Home security

• Home automation

Maintain

• Revenue (FY2017): £36.3m

• Gross margin (FY2017): £15.4m

(42%)

• EBITDA (FY2017): £9.5m*

Build

• Smart speakers for 3rd party brands

(majority with voice)

- turnkey module solutions

- licensing Frontier’s SmartSDK (model in

development)

• Frontier goal to be leading system integrator

for third party brands

Explore

• Evaluate market opportunity

• Engage with ecosystem

(partners / customers)

• Identify where Frontier

technology is applicable

• Develop business plan (first

revenues expected in 2020)

* Before Group costs

Financials: FY2017

6

Strong financial performance in 2017

31.7 32.1

41.0

FY 15 FY 16 FY 17

Revenues, £m

-0.8

1.9

0.7

FY 15 FY 16 FY 17

EBITDA, £m

-0.7

3.0

1.3

31 Dec 16 30 Jun 17 31 Dec 17

Net Cash, £m

• FY2017 up 28% due to

- Norway switch-off of FM

- growth in other European digital

radio markets

- first material revenues for Smart

Audio

• Improvement in FY2016 due

primarily to reduction in R&D

• Improvement in FY2017 due to

improvement in revenues / gross

margin

• Debt being repaid to schedule

• Cash generative since H2 2016

7

FY2017 Income Statement

On a constant currency basis,

revenues up 22% to US$53.0m

(FY2016: US$43.4m)

Gross margin slightly lower at 41%

(FY2016: 44%) due to lower margins in

Smart Audio

R&D expenditure

similar to FY2016

Sales & admin costs up

22% to support move into

Smart Audio

Substantial growth in

revenues and EBITDA

* R&D costs are all expensed ** Other non-trading costs relate to forex, share based payments and tax

2017Restated

2016

£m £m

Revenue 41.0 32.1

Cost of Sales (24.2) (18.0)

Gross margin 16.9 14.1

Research & development costs* (6.5) (6.6)

Sales & administrative costs (8.4) (6.9)

EBITDA 1.9 0.7

Depreciation and amortisation (2.6) (2.7)

Other non trading costs** (1.2) 0.6

Loss for the period from continuing operations (1.9) (1.4)

Loss for the period from discontinued operations 0.0 (15.9)

Loss for the period (1.9) (17.3)

Unit volumes shipped (m) 6.4 5.2

8

For the year ended 31 December 2017 Radio

£m

Smart Audio

£m

Group

£m

Total

£m Revenue 36.3 4.7 - 41.0 Cost of sales (20.9) (3.3) - (24.2)

Gross profit 15.4 1.5 - 16.9 Research & development (1.8) (4.7) - (6.5) Sales & administrative expenses – other (4.1) (3.8) (0.5) (8.4)

EBITDA 9.5 (7.1) (0.5) 1.9

FY2017 Segmental Analysis

• Radio EBITDA £9.5m

• Smart Audio in investment phase

Revenues

Radio up 15% (FY2016: £31.7m)

Smart Audio up 9x (FY2016: £0.5m)

Gross margin

Radio: 42%; Smart Audio: 31%

R&D expenditure split

Radio 27%; Smart Audio 73%

9

Balance Sheet as at 31 December 2017

• Cash and cash equivalents

- up to £5.9m (31 Dec 2017)

- from £3.4m (31 Dec 2016)

• Debt being repaid and net cash improved

- net cash of £3.0m (31 Dec 2017)

- net debt of £(0.7)m (31 Dec 2016)

• Inventories up to £3.5m from £2.6m,

reflecting increase in volumes, especially

in Smart Audio

2017

Restated 2016

£’000 £’000 Non-current assets Goodwill 8.5 8.5 Other intangible assets 6.2 8.5 Property, plant and equipment 0.3 0.4

15.0 17.4

Current assets Inventories 3.5 2.6 Tax receivable 0.1 1.1 Trade and other receivables 3.3 8.2 Cash and cash equivalents 5.9 3.4

Total current assets 12.8 15.3

Total assets 27.8 32.7

LIABILITIES Current liabilities

Trade and other payables 11.4 12.1

Total current liabilities 11.4 12.1

Other liabilities > 1 year - 2.9

Total liabilities 11.4 15.0

EQUITY Share capital 4.3 4.3 Share premium 115.3 115.3 Share based payment reserve 5.8 5.1 Foreign exchange reserve (0.1) (0.0) Retained earnings (108.8) (106.9)

Total equity 16.4 17.8

Total equity and liabilities 27.8 32.7

Radio: “Maintain”

11

Frontier: #1 technology provider for consumer DAB and Advanced Radio

World-leading

audio technology*

Blue chip audio

brands

Factory / ODM

relationships**

Frontier’s core strengths in Radio

* 4th generation digital radio silicon; dedicated teams for hardware, embedded software and apps

** Frontier’s presence in Hong Kong / Shenzhen provides critical support to audio device manufacturers (key differentiator for the Group)

• 80% share in DAB and Advanced Radio

• 16 years’ heritage in DAB technology and

relationships

- 45m units shipped to date

• Stable, positive cashflows

- FY2017 EBITDA of £9.5m (before Group

costs)

12

Digital radio market developments

Digital radio expanding across Europe and Australia

Poland

Czech

Germany:

Strong

political

commitment

UK: Gov’t

review when

50% of listening

is digital*

Italy: all

receivers to be

digital from

2020

FM switch off

Norway (2017)

Switzerland

(2020-24)

Slovakia

Austria

Germany

Netherlands

Denmark

Norway

UK

SwitzerlandFrance

Belgium

Established markets with DSO date

Established markets with no DSO date

Recent launches / partial roll-out

Trials on air

Italy

Others: NL,

Denmark and

Belgium - plus

Australia

France:

when coverage

>20%, all

receivers must

offer DAB +

* Currently on 49.9% - likely to hit 50% in May 2018

13

2018 Roadmap: three incremental developments to maintain market leadership

Digital Radio – Automotive Aftermarket

• New software to run on lower cost silicon (Kino 4) to address opportunity of DSO in

Switzerland (starting 2020)

Advanced Radio – adding Amazon Music

• Adding major music service to selection already available (others include Spotify, Deezer, Napster

and Tidal)

Advanced Radio - adding voice control via Alexa

• Working with Amazon to enable radios based on the Venice 6 platform to be controlled

via the Dot and Echo devices (using a “connected audio” API)

Investment of £1.8m to maintain positive EBITDA (includes sustaining engineering)

Smart Audio – growth engine of Frontier: “Build”

15

Smart appliances

Voice speakers - future hub of the Smart Home

Smart

TVs

Smart

thermostats

Smart lighting

Wholesale market for voice-

enabled wireless speakers will

reach:

Source: Strategy Analytics, Sept 2017

2020

US$8.6 billionUS$2.8 billion

2017

• Speakers no longer used just for audio

– new product category offering Smart

Home control and Internet access

• Significant market opportunity

16

Google and Amazon goal – domination of Smart Home data

Ecosystem player strategies (two routes into consumer homes)

Enabled by Frontier

solutions

Ecosystem in-house

technology

JBL Playlist with Google

Chromecast built-in

Marshall Acton

with Chromecast built-in

Apple

Homepod

Amazon

Echo & Dot

Google

Home

First party devices Third party branded devices1 2

17

Source: Strategy Analytics (Sept 2017)

8 7 7 5

613

2323

34

42

32

47

62

76

1

48

2017 2018 2019 2020

Non-voice Voice-enabled 3rd party Voice-enabled 1st party

Smart Audio: anticipated market growth

• By 2020, over 90% of smart speakers

expected to be voice-enabled

• Today, voice-enabled sector dominated

by first party products

• Over time, third party products

expected to increase share

• As third party is nascent sector, speed

and scale to be determined3rd party

smart

audio devices

Smart Audio device annual shipments, millions

Annual shipments of 76m units by 2020; 28m from third party brands

18

• Voice assistants

• Cloud services

• Music providers

• Smart home

connectivity

• Hardware (module)

• SmartSDK licensing

• Turnkey solutions

• Engineering services

(customisation)

• Pre-certification / eco

system compliance

• Mobile app & data

services

• Industrial Design

• Acoustic

engineering

• Manufacturing

• Product Marketing

• Distribution

Frontier’s role in the Smart Audio value chain

Ecosystem

players

Solution

providers

ODMs

(Manufacturers)Brands Retailers End Users

Wi-Fi / processor

chips

19

Frontier: a leading Smart Audio system integrator

Apple AirPlay 2 / Siri*

FRONTIERSmartSDK

Google Voice Assistant

FRONTIERSmartSDK

Frontier’s Minuet

module family

Alexa Voice Services

FRONTIERSmartSDK

Frontier’s Minuet

module family

Frontier’s Minuet

module family

One of the few companies working with all three major ecosystem players

20

Commercial progress

2018: Ten models with

Google Voice Assistant

2017: 20 models with

Google Chromecast built-in

Next step – develop licensing model for SmartSDK, targeting larger ODMs

Growing number of design wins

21

Frontier SmartSDK roadmap

June 17 Dec 17 Q2 2018 H2 18March 18

• Google Chromecast

built-in

• Spotify Connect

• AirPlay 1

• Internet Radio

• Bluetooth A2DP /

AVRCP

• Multi-room

• Slave mode

• Wireless Stereo

• High-res audio

support (96/24)

• Google Voice

Assistant

• AirPlay 2

• Simple display

support

• Alexa Voice

Services

Multi-ecosystem supportVoiceSmart audio

Core platform Platform enhancements

Invest ~£5.6m in R&D in 2018 – to establish leadership position in sector

Smart Home: “Explore”

23

Smart Home market is on the move

Smart

appliances

Smart

thermostats

Smart

lighting

Security Home health

Voice control expected to play central role

24

Smart Homes in N America and Europe, millions

Source: Berg Insight, Smart Home and Home Automation, 2017

The future of Smart Homes

• North America currently in lead; Europe expected to

catch up

• Key sectors today

- energy management / climate control

- lighting and window control

- security and access control

• In medium term, expect emergence of

- home appliances

- healthcare and assisted living

2938

4961

24

37

56

44

62

86

117

14

2017 2018 2019 2020

North America Europe

39%

CAGR

By 2020, over 100 million smart homes in North America and Europe

25

Next step: assess market Smart Home opportunity

Frontier’s transferable Smart technology

assets

Hardware

solutions

Connectivity / voice

SDK

Frontier cloud

services

• Evaluate and prioritise Smart Home product categories

for Frontier focus

• Will assess

- scale / growth prospects

- maturity of sector / competitive landscape

- technology needs of brands / suitability of Frontier

solutions

• Develop go to market plan

Board changes

27

Board changes

• Dr Martin Knight, after nine years as a Non-Executive Director and Chairman since July 2015, will not be

standing for re-election at the Annual General Meeting (‘AGM’) in April 2018

• Chris Batterham, a Non-Executive Director since 2012, has also informed the Board of his decision not to stand

for re-election

• Both will cease to be Directors at the conclusion of the AGM

• Sir Hossein Yassaie has been appointed a Non-Executive Director with immediate effect

• The Group has initiated a search to identify further candidates to join the Board, including for the role of

Chairman

• Martin Harriman, who joined the Board in December 2016, will continue in his current position of Non-Executive

Director

Conclusions

29

Summary FY2017

EBITDA

Profitable

FY2017 EBITDA:

£1.9m

(up 171%)

Cash

generative

FY2017: +£3.7m

Strong

growth

FY2017 revenues

£41.0m

up 28%*

* up 22% in constant currencies

30

Objectives for 2018

Radio Smart Audio Smart Home

Maintain

• Maintain market share

• Incremental R&D

• Continue to deliver positive

EBITDA

Build

• Deploy Google Voice, Alexa and AirPlay 2

solutions

• Secure design wins / establish Frontier as

leading Smart Audio system integrator

• Build volumes, revenues and margins

Explore

• Develop technology platform

and go to market plan with

- development in 2019/20

- first revenues anticipated

in 2020

31

Thank You

Contact:

anthony.sethill@frontiersmart.com (CEO)

jonathan.apps@frontiersmart.com (CFO)

32

Voice-enabled Smart Audio device annual shipments, millions

Source: Strategy Analytics (Sept 2017)

1620 20 18 16

12

811 14

1617

4

716

3

4

55 5

23

34

42

4850 50

4

10 14

1

2017 2018 2019 2020 2021 2022

Amazon Google Apple Other

Medium term outlook

1 2 3 5 7 103

7

12

21

31

1

3

5

8

10

1

6

13

23

36

50

10

2017 2018 2019 2020 2021 2022

Amazon Google Other

First party devices Third party devices

Market expected to be split equally between first and third party

33

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