Management Presentation July2013 - API Technologies€¢ This presentation about API Technologies...
Transcript of Management Presentation July2013 - API Technologies€¢ This presentation about API Technologies...
1
Management Presentation
July 2013
FORWARD LOOKING STATEMENTS
• This presentation about API Technologies Corp. (the “Company”) includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact, including statements regarding industry prospects or future results of the business, operations or financial position of API made in this presentation are forward-looking. We use words such as believe, expect, anticipate, intends, estimate, forecast, project, should and similar expressions to identify forward-looking statements. Forward-looking statements are based on management’s current expectations of our near-term results, based on current information available pertaining to us and are inherently uncertain. We wish to caution investors that any forward-looking statements made by or on our behalf are subject to uncertainties and other factors that could cause actual results to differ materially from such statements. These uncertainties and other risk factors include, but are not limited to: the affect of the unfavorable global, national and local economic conditions on our customers and our statements. These uncertainties and other risk factors include, but are not limited to: the affect of the unfavorable global, national and local economic conditions on our customers and our businesses, the affect of the current economic crisis on our ability to effect our business plans and strategies, the changing political conditions in the United States and other countries, governmental laws and regulations, anticipated government budget changes, international trading and export restrictions, customer product acceptance, and access to capital markets, and foreign currency risks. These risks and uncertainties, as well as other risks and uncertainties could cause our actual results to differ significantly from management’s expectations. New factors emerge from time to time and it is not possible for management to predict all such factors, nor can it assess the impact of each such factor on the business or the extent to which any factor, or a combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. We assume no obligation to update or revise any forward-looking statements made herein or any other forward-looking statements we make, whether as a result of new information, future events, or otherwise.
2
KEY FACTS
Company API Technologies Corp.
Exchange/Ticker NASDAQ: ATNY
Share Price (7/11/13)(1) $2.80
52-Week High / Low $3.44/$2.36
Shares O/S Basic/Diluted: 54.8 million / 62.3 million
Market Cap $153 millionMarket Cap $153 million
Enterprise Value(2) $260 million
LTM Revenue(3)(4) $270 million
LTM Adjusted EBITDA(3)(4) $34 million
LTM CAPEX(4) $1.8 million
(1) Earnings announcement
(2) Reflects inclusion of Q3 debt repayment of $28.8M on proceeds from sale of Data Bus product line
(3) Includes Sensors business, which was sold in April 2013 (mid-quarter), and was reported as a Discontinued Operation.
(4) LTM period ending May 31, 2013, excludes Sensors business
3
INVESTMENT HIGHLIGHTS
• 90% sole/primary source positions with recurring
revenue streams
• One of the world’s largest RF/microwave merchant
suppliers
Broad portfolio of IP
with design-in position
Focus on revenue
generation and
• Revenue up 11.6% quarter over quarter, in spite of
challenging defense environment
4
generation and
profitability
challenging defense environment
• Book-to-Bill of 1:1
• Q-over-Q Adjusted EBITDA and net income growth
• Continue to generate Free Cash Flow from Ops
• Recently divested Sensors business unit & Data
Bus product line, in two separate transactions,
for a total of $83.9 million
• De-levering company through debt repayment
Demonstrated ability
to generate cash &
monetize assets
• Provider of RF/microwave, microelectronics, and
security technologies for the
defense, aerospace, and commercial industries
• Founded in 1981; Listed on NASDAQ June 2011
with a new company vision
– Today, one of the largest non-Prime provider of
COMPANY OVERVIEW
– Today, one of the largest non-Prime provider of
RF/Microwave and microelectronics
• ~2,000 employees worldwide
• ~3,300 customers worldwide
• Revenue breakdown
– ~75% Domestic / 25% International
– ~60% Defense & Government / 40% Commercial
5
INCREASING AVAILABLE MARKETS
2009-2010
2011
2012-Present
$4.4B SAM
• Integrated & Multi-
function RF Assemblies
• Microwave Filters
• Oscillators
• Power Management
• Radar Subsystem Solutions
• RF Systems
• RF/Microwave Modules
• Integrated & Multi-
function RF Assemblies
• RF Silicon &
RF Components
• Power Amplifiers
6
1981: Founded June 2011: NASDAQ Listed
1981-2008
2009-2010
Key Acquisitions: Key Acquisitions:
• Data Bus Products
• Analog Mixed
Signal Products
• Components
• TEMPEST & Emanation
Security, Encryption &
Ruggedized Systems
• 1553 Data Bus
• Sys & Subsys Solutions
• Build-to-Print Services
• Power Management
• Hybrids
• Active & Passive
Components
• EMI Filters
• Class K (Space)
• Secure Communications
• EMS
• Power Amplifiers
• Microelectronics
• Custom Magnetics
• Specialty Connectors
• Rugged Power Rectifiers
• Power Distribution Units
• Secure Mobility Solutions
Key Acquisitions:
New/Expanded
Products & Capabilities
OUR MARKETS & CUSTOMERS
U.S. DoDU.S. DoD
53%
• Radar
• Military aircraft
Missile defense
Medical, Industrial & Medical, Industrial &
Commercial AerospaceCommercial Aerospace
19%
• Medical devices
• Commercial air
• Alt. Energy
Government & Government &
SecuritySecurity
14%
• Secure
communications
Secure access
Commercial & Commercial &
CommunicationsCommunications
14%
• Mobile devices
• Wireless
communications
7
Quarter Ended May 31, 2013, Excludes Sensors Business
• Missile defense
• SATCOM
• C4ISR
• UAVs
• Alt. Energy
• Downhole
• Transportation
• Secure access
• Encryption
communications
• Satellites
• Enterprise
systems
STRONG PRODUCT PORTFOLIO
71%
7%
Systems, Subsystems
& Components (SSC)
Secure Systems &
Information Assurance
(SSIA)
8
LTM-Ended May 31, 2013, Excludes Sensors Business
22%
(SSIA)
Electronics
Manufacturing
Services (EMS)
78% of Revenue is Product Driven
MULTI-CHANNEL ACTIVE ANTENNA ARRAY MODULES
SOFTWARE / HARDWARE ENCRYPTION
WELL POSITIONED SUPPLIER AT
EVERY STAGE OF VALUE CHAIN
SYSTEMS & SOLUTIONS
• RF Microwave & Microelectronics
• Electromagnetic Integrated Solutions (EIS)
• Power & Systems Solutions
• Secure Systems & Information Assurance
9
COMPONENTS
HYBRIDS
SINGLE-FUNCTION ASSEMBLIES
MULTI-FUNCTION ASSEMBLIES
ACTIVE ANTENNA ARRAY MODULES
INTEGRATED MICROWAVE ASSEMBLIES (IMA)
ATTRACTIVE PRODUCT PORTFOLIO
RF/Microwave & Microelectronics
45.3%
Electromagnetic Integrated
Solutions (EIS)
21.1%
Power & Systems Solutions
4.5%
Secure Systems &Information
Assurance (SSIA)
22.2%
Electronics Manufacturing
Services (EMS)
6.9%
RF, microwave,
millimeter wave and
Passive
components,
Power management
and distribution
Secure
communications Contract
manufacturing and
10
millimeter wave and
microelectronics
products for defense
and commercial
markets
components,
including EMI
filters, magnetics
and ceramics
and distribution
products, EOD
products, and
systems integration
communications
products, including
TEMPEST, rugged
and secure access
manufacturing and
new product
introduction
services for hi-rel
SSC Systems, Subsystems & Components (SSC) Segment SSIA Secure Systems & Information
Assurance (SSIA) Segment EMS Electronics Manufacturing Services (EMS) Segment
EXAMPLEs
AESA
Radar
Modules
GaN Power
Amplifiers
EXAMPLEs
EMI
Filters
Custom
Magnetics
EXAMPLEs
DC Power
Rectifier
Power Monitoring
EXAMPLEs
Secure, Rugged
Communication
Hub
Netgard®
Secure Access
EXAMPLEs
Test and
Assembly for
EW Systems
Electronics for
Hydro Spas
LTM-Ended May 31, 2013, Excludes Sensors Business
KEY GROWTH DRIVERS
•Defense electronics
CAGR of 3%
•Battlefield Miniaturization
•Radar Technology & Missile
Defense Advancements
•Energy demand (oil and gas,
alternative energy)
•Commercial air
•Satellite communications
•Increased competition within
11
Defense Advancements
•C4ISR Growth
•Information Assurance
•Unmanned Systems
•Foreign Military Sales
•Increased competition within
RF spectrum
•Successfully synthesize design
experience into new products
and applications
DEFENSE COMMERCIAL
WELL POSITIONED DEFENSE SUPPLIER
Secure CommunicationSecure Communication
Military AircraftMilitary Aircraft
Radar ProgramsRadar Programs
Electronic WarfareElectronic Warfare
Weapons ProgramsWeapons Programs
Significant program diversity• No single program over 2% LTM revenue
• Mitigates potential effects of Sequestration
• Mix of new and enduring programs
• Broad install base•70 years of history
12
Missile ProgramsMissile Programs
Industrial ProgramsIndustrial Programs
Weapons ProgramsWeapons Programs
CommunicationsCommunications
& Wireless& Wireless
Classified ProgramsClassified Programs
•70 years of history
• Incumbent supplier
•Committed customers
•Preferred Supplier Status•Strengthens competitive position
•With many of our customers we are a
one-stop-shop; aids with their supply
chain consolidation
API’S PRODUCTS ON KEY DOD/GOVERNMENT
PLATFORMS & PROGRAMS
Secure Communication
Missile Programs
Military Aircraft
C4ISR
• ID Friend or Foe
RadarPrograms
ElectronicWarfare
WeaponsPrograms
13
Secure communication solutions used by U.S. Government entities and NATO countries
• TEMPEST& Emanation Security
• Rugged/Mobile CommunicationsPlatforms
• Secure Networking• Encryption
• Standard Missile• AEGIS• AMRAAM• APR-39• HTS/HARM• JDAM• LRAS• Maverick• PAC-3• JDAM• Stinger• THAAD• Tomahawk
• Eurofighter Typhoon• MQ-1 Predator • RQ-4N Global Hawk• Shadow• Sea Hawk• Black Hawk• B-2 Bomber• V-22 Osprey• P-3 Orion• F-16 Eagle• F-18 Fighting Falcon• F-22 Raptor• F-35 JSF• P-8A Poseidon• Eurocopter
• ID Friend or Foe• Falcon• Gen-5 Adder• Quad Tracker• WIN-T• JTIDS• JPALS• JTRS• NMT• WIN-T• Skyfire• VSAT• WAVPAC/Manpack
• ALR56• AMDR• AN/TPY-2• G/ATOR• LAMPS• LCMR• PRSS• MAWS• SIRFC• MK-73• SR HAWK• TRIMM
• AIDEWS• DEWS• CREW/iCREW• MALD• RC58• Sahara Program• SEWIP• Symphony• MK-53
• Hydra• JSOW• Spider• Classified Programs
FEATURED DEFENSE TECHNOLOGIES
Power AmplifiersAESA Radar System-Level
Ready Solutions
• Adds $250M SAM
• $2.6M booked so far
• Line of GaN-based pulsed and continuous
• $2M booked so far
• One opportunity alone offers $90-100 M
lifetime revenue potential
14
• Line of GaN-based pulsed and continuous
power solutions
• Increased power density, reduced size
and improved efficiency position us
very favorably against competitors
lifetime revenue potential
• Expected to reach $14-$15M/year
beginning 2015
• System level ready, active sub arrays used
in AESA radar and command control data
links for air, ground, sea and space
• Technically advanced design offers
significant competitive differentiation
COMMERCIAL & INDUSTRIAL PRODUCTS
MEET EMERGING DEMANDS
Commercial Aerospace Medical and Industrial
• Cockpit controls
• Electronics for landing gear
• Fuel systems
• In-Flight Entertainment Sys
• Lighting Systems
• Robotic surgery systems
• MRI & mammography equipment
• Blood analyzers
• Dental drills
• Industrial blenders
15
Focus on high reliability products. High barrier to entry offers competitive advantage.
Communications & Consumer Energy
• High temperature electronics
• Power grid electronics
• Solar panels
• Power distribution
• Cell phone towers
• VoIP & optical base stations
• Secure remote access
• Mobile news trucks
LONG-STANDING CUSTOMER BASE
• Long-standing, deep relationships
built on customer collaboration
• No customer over 7% of revenue
• ~3,300 end customers
• Serve all the key defense
contractors and broad range of
Top 10 customers in alphabetical order
Large Financial Institution
contractors and broad range of
Fortune 500 companies
• Supplier to the U.S., U.K and
Canadian governments, with
several cleared facilities
• Exposed to multiple end markets
16
LTM-Ended May 31, 2013, Excludes Sensors
RECENT HIGHLIGHTS
Recent Wins Q2 Highlights
• 11.6% Quarter-over-Quarter revenue
increase
• Company-wide Book-to-Bill of 1:1
• Term debt repayment of $75.9 million as of
July 10, 2013
$6M order for Microwave
Subassemblies
for European Weapons
Programme
$1.3M follow on order
for DoD weapons
programs; follows
17
Current Quarter
July 10, 2013
• Net income of $7.5M
• In July, sold Data Bus business to Data
Device Corporation (DDC) for $32.5 M
• Q3 Ends August 31, 2013
programs; follows
previously placed orders
for $3.1M (September) &
$1.9M (December)
$7.2M order for electronic assemblies
for electronic warfare platform
OUR
FOOTPRINT
• Certified facilities, including:- MIL-PRF-38534 (Class H and K)- AS9100 Rev C- ISO 13485:2003- ISO 9001:2008
(All manufacturing facilities)
18
Manufacturing & Design
Design
• Domestic & International Footprint
• Trusted facilities & personnel- 12 Trusted facilities (US,
UK, and Canada) High barriers to entry
• International manufacturing locations are API companies and not subcontractors; same equipment and processes as U.S. facilities
• Global sales presence
QUARTERLY REVENUE TREND ($M) (1)
19
Includes Legacy API
& SenDEC
Acquisition
Includes RTIE
& C-MAC
Acquisitions
Includes
CMT Acquisition
Includes Spectrum
Control Acquisition
(1) Quarters include Sensors business, which was sold in April 2013 (mid May 2013-ending quarter),
and was reported as a Discontinued Operation.Strong Revenue In Spite of Sequester
28.7 69.2 75.1 70.7 78.9 68.4 62.7 67.2 71.2
May-11 Aug-11 Nov-11 Feb-12 May-12 Aug-12 Nov-12 Feb-13 May-13
Q over Q Growth Without Sensors ($68.1M)
QUARTERLY REVENUE TREND BY SEGMENT ($M) (1)
Key Points
•EMS Revenue
improvement
resulting from EMS
reorganization
initiated June 2012
• SSIA has a lumpy
revenue profile.
20
revenue profile.
Canada and UK
fiscal year end in
May-ending
quarters
•SSC segment
business growth
even with recent
divestiture activity
(1) Quarters include Sensors business, which
was sold in April 2013 (mid May 2013- ending
quarter), and was reported as a Discontinued Op.
QUARTERLY ADJUSTED EBITDA TREND ($M) (1)
8.1
11.5 10.8 11.2
9.3 8.3
7.69.1
2%
7%
12%
17%
22%
4
6
8
10
12 Adj. EBITDA Adj. EBITDA %
21
Includes Legacy API
& SenDEC
Acquisition
Includes RTIE
& C-MAC
Acquisitions
Includes
CMT Acquisition
Includes
Spectrum Control
Acquisition
(1) Quarters include Sensors business, which was sold in April 2013 (mid May 2013-ending quarter), and was reported as a Discontinued Operation.
(3.4)
-13%
-8%
-3%
2%
-4
-2
0
2
May-11 Aug-11 Nov-11 Feb-12 May-12 Aug-12 Nov-12 Feb-13 May-13
Q over Q Growth Without Sensors ($8.7M)
BALANCE SHEET(1)
Assets(in $ millions)
Cash & cash equivalents $10.2
Accounts receivable $42.4
Inventory $63.7
Other $3.7
Total Current $120.1
Liabilities & Shareholders’ Equity (in $ millions)
Accounts payable & accrued expenses $34.9
Current debt $8.4
Other $1.9
Total Current $45.2
Fixed assets $37.8
Goodwill, intangibles & other $178.4
Total $336.3
Long-term debt & other* $130.4
Deferred taxes $4.2
Total Liabilities $179.8
Redeemable Preferred Shares $25.5
Total Shareholders’ Equity & Other $131.0
Total $336.3
(1) As of May 31, 2013
(2) Does not include additional 7-10-13 debt repayment of $28.8 M net proceeds from sale of the Data Bus product line.
Long-term debt would be $116.8 M after the $28.8 M repayment.
22
COMPANY LEADERSHIP
BEL LAZAR, President & Chief Executive Officer
• Over 25 years of experience in the defense, semiconductor and technology sectors
• Most recently served as the Senior Vice President of Operations at Microsemi Corporation
• Previously spent over 22 years at International Rectifier (NYSE: IRF) in expanding leadership and
general management roles, culminating as Vice President of the Company’s Aerospace &
Defense business unit
• Has completed over 12 acquisitions and over 25 consolidations within the Aerospace & Defense
electronics sectorelectronics sector
23
PHIL REHKEMPER, Executive Vice President & Chief Financial Officer• Joined API in April 2012• Brings to API more than 25 years of financial and strategic planning experience• Previously served as Vice President of Finance for International Rectifier (NYSE: IRF) and Chief
Financial Officer and Vice President of Finance for Alliance Fiber Optic Products
INVESTMENT HIGHLIGHTS
• 90% sole/primary source positions with recurring
revenue streams
• One of the world’s largest RF/microwave merchant
suppliers
Broad portfolio of IP
with design-in position
Focus on revenue
generation and
• Revenue up 11.6% quarter over quarter, in spite of
challenging defense environment
24
generation and
profitability
challenging defense environment
• Book-to-Bill of 1:1
• Q-over-Q Adjusted EBITDA and net income growth
• Continue to generate Free Cash Flow from Ops
• Recently divested Sensors business unit & Data
Bus product line, in two separate transactions,
for a total of $83.9 million
• De-levering company through debt repayment
Demonstrated ability
to generate cash &
monetize assets
FOLLOW ATNY
Investor Relations App
for iPhone®/iPad® & Android™
25
@apitechnologies
Search: API Technologies