management presentation july2014 - api technologies looking statements • this presentation about...
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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.
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KEY FACTS
Company API Technologies Corp.
Exchange/Ticker NASDAQ: ATNY
Share Price(1) $2.80
52-Week High / Low $3.86/$2.20
Shares Outstanding 55 millionShares Outstanding 55 million
Market Cap(1) $154 million
Enterprise Value(1) $275 million
LTM Revenue(2)(3) $234 million
LTM Adjusted EBITDA(2)(3) $26 million
(1) May 30, 2014
(2) LTM period ending May 31, 2014
(2) Does not include Sensors business (sold April 2013) and Data Bus product line (sold July 2013), both now reported as Discontinued Operations
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• 90% sole/primary source positions with recurring
revenue streams
• Design-in position on over 300 defense and
industrial programs
• One of the world’s largest RF/microwave merchant
suppliers
Broad portfolio of IP
with design-in position
Focus on revenue
• Consistently Adjusted EBITDA profitable
• Over 25% of revenue from new products
INVESTMENT HIGHLIGHTS
4
Focus on revenue
generation and
profitability
• Over 25% of revenue from new products
• Addition of standard and customizable products
to the portfolio broadens access to worldwide
defense and commercial customers
• De-levering company through debt repayment –
over $62M total debt eliminated since
February 2013 re-finance (1)
De-levering through
debt repayment
(1) May 31, 2014 Quarter End
• Provider of RF/microwave, microelectronics,
power, and security solutions 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
• 1,870 employees worldwide
• 3,000+ customers worldwide
• Revenue breakdown(2)
– ~70% Domestic / 30% International
– ~65% Defense & Government / 35% Commercial
5
(1) LTM Ended May 31, 2014
INCREASING AVAILABLE MARKETS
2011
2012 - Present
$5.5B SAM
• Integrated & Multi-
function RF Assemblies
• Radar Subsystem Solutions
• Mobile Power Solutions
• RF Systems
• RF/Microwave Modules
• Integrated & Multi-
function RF Assemblies
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1981: Founded June 2011: NASDAQ Listed
1981-2008
2009-2010
• Analog Mixed
Signal Products
• Components
• TEMPEST & Emanation
Security, Encryption &
Ruggedized Systems
• Sys & Subsys Solutions
• Build-to-Print Services
function RF Assemblies
• Microwave Filters
• Oscillators
• Power Management
• Hybrids
• Active & Passive
Components
• EMI Filters
• Class K (Space)
• Secure Communications
• EMS
function RF Assemblies
• RF Silicon &
RF Components
• Power Amplifiers
• Microelectronics
• Custom Magnetics
• Specialty Connectors
• Rugged Power Rectifiers
• Power Distribution Units
• Secure Mobility Solutions
• FIPS Cryptographic Module
New/Expanded
Products & Capabilities
OUR MARKETS & CUSTOMERS
U.S. DoDU.S. DoD
55%
• Radar
• Military aircraft
Missile defense
Medical, Industrial & Medical, Industrial &
Commercial AerospaceCommercial Aerospace
21%
• Medical devices
• Commercial air
• Alt. Energy
Government & Government &
SecuritySecurity
10%
• Secure
communications
Secure access
Commercial & Commercial &
CommunicationsCommunications
14%
• Mobile devices
• Wireless
communications
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LTM Ended May 31, 2014
• Missile defense
• SATCOM
• C4ISR
• UAVs
• Alt. Energy
• Downhole
• Transportation
• Secure access
• Encryption
communications
• Satellites
• Enterprise
systems
STRONG PRODUCT PORTFOLIO
71%
9%
Systems, Subsystems
& Components (SSC)
Secure Systems &
Information Assurance
(SSIA)
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LTM Ended May 31, 2014
20%
(SSIA)
Electronics
Manufacturing
Services (EMS)
80% 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 Solutions
• Secure Systems & Information Assurance
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COMPONENTS
HYBRIDS
SINGLE-FUNCTION ASSEMBLIES
MULTI-FUNCTION ASSEMBLIES
ACTIVE ANTENNA ARRAY MODULES
INTEGRATED MICROWAVE ASSEMBLIES (IMA)
ATTRACTIVE PRODUCT PORTFOLIO
RF/Microwave & Microelectronics
41%
Electromagnetic Integrated
Solutions (EIS)
24%
PowerSolutions
6%
Secure Systems &Information
Assurance (SSIA)
20%
Electronics Manufacturing
Services (EMS)
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
Circular
Connectors
EXAMPLEs
Tactical
Power
Power Monitoring
EXAMPLEs
Secure, Rugged
Communication
Hub
Netgard®
Secure Access
EXAMPLEs
Electronics for
EW Systems
Electronics for
Medical Devices
LTM Ended May 31, 2014. Does not include Discontinued Operations.
KEY GROWTH DRIVERS
•Defense electronics
CAGR of 2.3% (1)
•Battlefield miniaturization
•Radar technology & missile
defense advancements
•C4ISR growth
•Wireless and satellite
communications
•Connected devices for
medical, smart metering
•Energy demand (oil and gas,
alternative energy)
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•C4ISR growth
•Information assurance
•Unmanned systems
•Foreign military sales
alternative energy)
•Commercial air
•Increased competition within
RF spectrum
DEFENSE COMMERCIAL(1) Teal Group
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 2.9% LTM revenue(1)
• 300+ Programs
• Majority are sole or primary source positions
• Broad install base
• Incumbent supplier; Positioned well for
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Missile ProgramsMissile Programs
Industrial ProgramsIndustrial Programs
Weapons ProgramsWeapons Programs
CommunicationsCommunications
& Wireless& Wireless
Classified ProgramsClassified Programs
• Incumbent supplier; Positioned well for
technology refreshes, retrofits &
upgrades
•70 years of history
•Preferred Supplier Status
•Strengthens competitive position
•With many of our customers we are a
one-stop-shop; aids with their supply
chain consolidation(1) LTM May 31, 2014
API’S PRODUCTS ON KEY DOD/GOVERNMENT
PLATFORMS & PROGRAMS
Secure Communication
Secure communication
Missile Programs
• Standard Missile
Military Aircraft
• Eurofighter Typhoon
C4ISR
• ID Friend or Foe
RadarPrograms
ElectronicWarfare
• DEWS • Hydra
WeaponsPrograms
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Secure communication solutions used by U.S. Government entities and NATO countries
• TEMPEST& Emanation Security
• Rugged/Mobile CommunicationsPlatforms
• Secure Networking• Encryption
• Standard Missile• AEGIS• Meteor• AMRAAM• Hellfire• HTS/HARM• JDAM• LRAS• Maverick• Patriot• JDAM• Stinger• THAAD• Tomahawk• Classified Programs
• Eurofighter Typhoon• MQ-1 Predator • RQ-4N Global Hawk• Shadow• Lynx• Rafael• Sea Hawk• Black Hawk• B-2 Bomber• CH-47 Chinook• 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• NOTM• WIN-T• Skyfire• UGCS• VSAT• WAVPAC/Manpack• Classified Programs
• ALR56• AMDR• AN/TPQ-53• AN/TPY-2• APR-39• AWACS • G/ATOR• LAMPS• LCMR• PRSS• MAWS• SIRFC• MK-73• SR HAWK• TRIMM • SEAVUE• Classified Programs
• DEWS• Avenger• CREW/iCREW• MALD• RC58• Sahara Program• SEWIP• Symphony• MK-53• Classified Programs
• Hydra• Sea Ceptor• JSOW• Spider• Classified Programs
KEY SUPPLIER TO SATELLITE/SPACE PROGRAMS
Only 19 facilities worldwide
have MIL-PRF-38435 Class K
(Space) certification.
Deep Space• Galileo• Cassini• USERS• Mars Phoenix• OCO • LCROSS• Mars Satellite Lab• ISS Kibo EF
Communications• Sirius Radio • DirectTV• Olympus• Optus 10• Amazonas 3• GPS-2F• Thor 7• MUOS• Inmarsat
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(Space) certification.
Two of them are ours. Scientific Missions• SAOCOM• Hershel Plank• Grail• EnMap• AMS-02• Lisa Pathfinder• Meteosat• Juno
• Inmarsat• Intelsat • Hot Bird
Launch & Reentry• Curiosity• Taurus• Minuteman• HII
FEATURED DEFENSE TECHNOLOGIES
AESA Radar System-Level
Ready Solutions
• Approximately $4M booked so far
• Line of GaN-based pulsed and continuous power solutions
• Over $6M booked so far
• Active Antenna Array Unit (AAAU) solution
• One opportunity alone offers $90-100 M lifetime revenue potential
• Technically advanced design offers significant competitive
differentiation
15
Power Amplifiers
• Line of GaN-based pulsed and continuous power solutions
• Increased power density, reduced size and improved
efficiency position us very favorably against competitors
Mobile Power Sources
• $3.6M of orders booked so far in FY14
• Mobile tactical power supply
• Used for UAV/UAS, C4ISR and Mission Control applications
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
• Defibrillators
• Dental drills
• Industrial blenders
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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
FEATURED COMMERCIAL TECHNOLOGIES
EMI Filters
• Go-to expert for challenges related to co-site interference
mitigation
Leading provider of off-the-shelf and custom high reliability
• >50% of the world’s market share of Electromagnetic
Interference (EMI) filters
• Used to protect critical systems – in medical and industrial
products – in the event of electric or magnetic interference from
weather/atmospheric conditions, solar flares, and nearby
electronic systems
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mitigation
• Leading provider of off-the-shelf and custom high reliability
microwave filtering products
• Used in cell towers, base stations for applications including wireless
communications and in-flight internetWireless Communication
Products
Remote Access
Products
• Line of award-winning commercial security products
• Used by major service providers and large financial institutions to
enable third party network access since 1982
• 10+ year partnership with Avaya
LONG-STANDING CUSTOMER BASE
• Long-standing, deep relationships built
on customer collaboration
• No customer over 8% of LTM revenue
• 3,000+ customers
• Serve all the key defense contractors and
Top 10 customers in alphabetical order
• Serve all the key defense 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
18
LTM Ended May 31, 2014
RECENT HIGHLIGHTS
Featured Q2 Wins Q2 Highlights
• Company-wide Book-to-Bill above 1 – Above 1.1 for Systems, Subsystems & Components
(SSC) segment
• $123.7 million fully-funded backlog
• Medical/Industrial/Commercial
$3.1M order for
transponders for a
UK defense program
$1.2M commercial aviation
win for microwave products
19
• Medical/Industrial/Commercial
Aerospace end market growth
• Key product lines launched:– Pre-filtered GPS LNAs for satellites and marine
navigation
– Portable wireless communication bandpass filters
– 1,000 W GaN-based power amplifiers and drivers
– Rad-hard power management products
$2.1 M order for
optical
network
solutions
$1.6M follow on order for
microwave products on a
major U.S. electronic
warfare platform
$1.7M win with
leading wireless
products company
OUR FOOTPRINTEurope North America Asia
Design & Manufacturing Manufacturing Center Sales OfficeDesign Center
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• Domestic & International Footprint
• Trusted facilities & personnel- 12 Trusted facilities
(US, UK, and Canada) High barriers to entry
• Certified facilities, including:- MIL-PRF-38534 (Class H and K)- AS9100 Rev C- ISO 13485:2003- ISO 9001:2008
(All manufacturing facilities)
• International manufacturing locations are API companies and not subcontractors; same equipment and processes as U.S. facilities
• Global Sales Presence
QUARTERLY REVENUE TREND BY SEGMENT ($M) (1)
39.3
39.6
42.9
45.6 42.6
39.7
39.3
30
40
50
60• RF/Microwave,
Electromagnetic Integrated
Solution (EIS) & Power
• Book-to-Bill above 1.1 in
May-14 quarter
• Company’s flagship products,
including AESA radar products,
high power amplifiers, power
management
SSC Segment
• Secure systems and
information assurance
SSIA Segment
21
(1) Quarters do not include Sensors business (Sold April 2013) and Data Bus product line (Sold July 2013), now reported as Discontinued Operations
10.7 14.9 16.2
13.3 11.0
13.9 8.8
3.4
3.85.1
3.7 5.6
5.4
5.1
0
10
20
30
Nov-12 Feb-13 May-13 Aug-13 Nov-13 Feb-14 May-14
information assurance
products
•Highly profitable business
segment
EMS Segment• Value-added
manufacturing for high-
reliability solutions
• May-14 revenue issues
due to defense program
timing
QUARTERLY ADJUSTED EBITDA TREND ($M) (1)
8.4
10%
12%
14%
16%
18%
5
6
7
8
9Adj. EBITDA Adj. EBITDA %
• Consistently
Adjusted EBITDA
profitable
• May-14 Adjusted
EBITDA decline
primarily due to EMS,
partially offset by
growth in SSC
22
(1) Quarters do not include Sensors business (Sold April 2013) and Data Bus product line (Sold July 2013), now reported as Discontinued Operations
5.2
7.3 8.4
6.3 6.5
4.3
0%
2%
4%
6%
8%
0
1
2
3
4
Feb-13 May-13 Aug-13 Nov-13 Feb-14 May-14
growth in SSC
segment
BALANCE SHEET(1)
Assets(in $ millions)
Cash & cash equivalents $10.6
Accounts receivable $36.8
Inventory $52.7
Other $3.8
Total Current $103.9
Liabilities & Shareholders’ Equity (in $ millions)
Accounts payable & accrued expenses $23.8
Current debt $8.5
Other $3.7
Total Current $36.0
Fixed assets $31.8
Goodwill, intangibles & other $152.7
Total $288.4
Long-term debt & other $124.5
Deferred taxes & deferred gain $14.0
Total Liabilities $174.5
Redeemable Preferred Shares $0.0
Total Shareholders’ Equity & Other $113.9
Total $288.4
(1) As of May 31, 2014
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• 90% sole/primary source positions with recurring
revenue streams
• Design-in position on over 300 defense and
industrial programs
• One of the world’s largest RF/microwave merchant
suppliers
Broad portfolio of IP
with design-in position
Focus on revenue
• Consistently Adjusted EBITDA profitable
• Over 25% of revenue from new products
INVESTMENT HIGHLIGHTS
24
Focus on revenue
generation and
profitability
• Over 25% of revenue from new products
• Addition of standard and customizable products
to the portfolio broadens access to worldwide
defense and commercial customers
• De-levering company through debt repayment –
over $62M total debt eliminated since
February 2013 re-finance (1)
De-levering through
debt repayment
(1) May 31, 2014 Quarter End