BAYLIN TECHNOLOGIES Q2 2018 · 2018. 9. 30. · 1 CL E A R SI GN A L S . SO UN D I NV E S T ME N T...
Transcript of BAYLIN TECHNOLOGIES Q2 2018 · 2018. 9. 30. · 1 CL E A R SI GN A L S . SO UN D I NV E S T ME N T...
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C L E A R S I G N A L S . S O U N D I N V E S T M E N T S .
BAYLIN TECHNOLOGIESQ2 2018
Baylin (TSX:BYL) is a diversified leading global wireless technology management company. Baylin focuses on research, design, development, manufacturing and sales of passive and active RF products and services.
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C L E A R S I G N A L S . S O U N D I N V E S T M E N T S .
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Forward-Looking Statements
This disclosure contains “forward-looking information” within the meaning of applicable Canadian securities legislation, including the “safe harbour” provisions of the Securities Act (Ontario) of the provincial securities laws in Canada. Such forward-looking information includes, but is not limited to, information with respect to our objectives and the strategies to achieve these objectives, as well as information with respect to our beliefs, plans, expectations, anticipations, estimates and intentions. It also includes information cited from third party sources. This forward-looking information is identified by the use of terms and phrases such as “may”, “would”, “should”, “could”, “expect”, “intend”, “estimate”, “anticipate”, “plan”, “foresee”, “believe”, or “continue”, the negative of these terms and similar terminology, including references to assumptions, although not all forward-looking information contains these terms and phrases.
Forward-looking information is based upon a number of assumptions and is subject to a number of risks and uncertainties, many of which are beyond our control, that could cause actual results to differ materially from those that are disclosed in or implied by such forward-looking information. Although the forward-looking information contained in this document is based upon what we believe are reasonable assumptions, investors are cautioned against placing undue reliance on this information since actual results may vary materially from the forward-looking information. Certain assumptions made in preparing the forward-looking information and our objectives include: our ability to generate sufficient revenue while controlling our costs and expenses; our ability to manage our growth effectively; the absence of material adverse changes in our industry or the global economy; trends in our industry and markets; our ability to manage risks related to expansion; our ability to maintain good business relationships; our ability to develop products and technologies that keep pace with the continuing changes in technology, evolving industry standards, new product introductions by competitors and changing client preferences and requirements; our ability to protect our intellectual property rights; the absence of intellectual property infringement or invalidity claims against us; our ability to manage and integrate acquisitions; our ability to retain key personnel; our ability to raise sufficient debt or equity financing to support our business growth; and the discretion of the Company with respect to the use of the proceeds of the offering.
Consequently, all forward-looking information contained in this document is qualified by the foregoing cautionary statements, and there can be no guarantee that the results or developments that we anticipate will be realized or, even if substantially realized, that they will have the expected consequences or effects on our business, financial condition or results of operation. Unless otherwise noted or the context otherwise indicates, the forward-looking information contained in this document is provided as of the date of this presentation, and we do not undertake to update or amend such forward-looking information whether as a result of new information, future events or otherwise, except as may be required by applicable law.
There are a number of non-IFRS measures used in this document, including EBITDA (earnings before interest, taxes, depreciation and amortization). For the purposes of this document, EBITDA is calculated as revenue less cost of sales and operating expenses. The Company believes that these non-IFRS measures are appropriate measures of the operating performance of the Company or potential acquisitions. The Company’s calculation of these measures may differ from the methodology used by other issuers and, accordingly, may not be comparable to such other issuers. The Company believes that these measures are appropriate measures of the Company’s operating performance because they facilitate an understanding of operating performance without giving effect to certain non-cash and overhead expenses. None of these measures are equivalent to net income or cash flow from operating activities determined in accordance with IFRS.
The industry data, technical information or other information prepared by third parties presented in this presentation, except where otherwise noted, has been compiled from industry sources and participants which, although not independently verified by the Company, are considered by the Company to be reliable sources of information. References in this presentation to reports or articles should not be construed as depicting the complete findings of the entire referenced report or article and such report or article is expressly not incorporated by reference into this presentation. The Company makes no representation or warranty as to the accuracy or completeness of any data or information prepared by third parties included in this presentation and the Company assumes no liability whatsoever relating to or resulting from such data or information or the use thereof, errors therein or omissions therefrom.
All figures are presented in Canadian dollars unless otherwise indicated.
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C L E A R S I G N A L S . S O U N D I N V E S T M E N T S .
RECENT KEY STRATEGIC DEVELOPMENTS
F I S C A L 2 0 1 8
Successfully completed two M&A transactions and increased EV by $109M
Diversified Baylin and reduced Samsung concentration from 43% to 29%
Gained access to a technology that is essential for 5G (mm wave and power)
Added 25 new institutions to the institutional investor base
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Baylin is a World-Leader in Data Transmission
Mobile antennas
Infrastructure antennas
Embedded antennas
Satellite connectivity
products
~23% compound annual growth in revenue since 2014
$141M 2017 revenue(1)
~950 employees
100+ patents
Baylin offers a turnkey solution that enables data to be transmitted across wireless networks
5 R&D centers
(1) Pro-forma for the acquisition of Alga Microwave and the RF & Microwave divisions of Advantech Wireless
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Broad Geographic Footprint
Legend
Baylin Locations
Baylin HQ
Bogota, Columbia
Toronto, ON Canada
Wuxi, China
Tempe, AZ USA
Seoul, South Korea
Hanoi, Vietnam
Montreal, QC Canada
Atlanta, GA USA
São Paulo, Brazil
Cambridgeshire, UK Moscow, Russia
Kolkata, India
Ottawa, ON Canada
Newark, NJ USA
Dallas, TX USA
Jabil BSA production facility
Guadalajara, Mexico
NYC, NY USA
California, USA
Mexico City, Mexico
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C L E A R S I G N A L S . S O U N D I N V E S T M E N T S .
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Experienced Board of Directors
Jeffrey C. RoyerChairman
Director Since:Sep. 2013
Harold WolkinVice-Chairman
Director Since: Nov. 2013
Randy DeweyDirector, President & CEO
Director Since: Sep. 2013
David SaskaDirector
Director Since: May 2018
Don SimmondsDirector
Director Since: Nov. 2013
Stockwell DayDirector
Director Since: Nov. 2013
Barry J. ReiterDirector
Director Since: Nov. 2013
David GelermanDirector
Director Since: Feb. 2018
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Recent Hires Have Enhanced our Management Team
Randy DeweyDirector, President & CEOYear Joined: 2015
Michael WolfeChief Financial OfficerYear Joined: 2017
Mike MoonPresident, Asia PacificYear Joined: 2014
Experience:
Jerry KirshmanCOO & President, Americas / EMEAYear Joined: 2017Experience:
John RestivoPresident, AdvantechYear Joined: 2018
Experience:
Helder ConstantinoChief Strategy OfficerYear Joined: 2015
Jay GiblonVP, Information TechnologyYear Joined: 2015
APAC Americas / EMEA Advantech
Dr. Minya GavrilovicEVP, Innovation & Product Strategy
Year Joined: 2017
http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=2ahUKEwi3oPzW1uLaAhUL8IMKHRI4Dy0QjRx6BAgBEAU&url=http://www.sky-brokers.com/home/suppliers/radyne-comstream-inc-cefd-&psig=AOvVaw35Z2kA7VvgoK9Dg8yBMF_w&ust=1525201012215358http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=2ahUKEwi3oPzW1uLaAhUL8IMKHRI4Dy0QjRx6BAgBEAU&url=http://www.sky-brokers.com/home/suppliers/radyne-comstream-inc-cefd-&psig=AOvVaw35Z2kA7VvgoK9Dg8yBMF_w&ust=1525201012215358
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C L E A R S I G N A L S . S O U N D I N V E S T M E N T S .
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GALTRONICS
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40 YEARS OF INNOVATION
2012Spider CloudSmall Cell
DirectionalPanel20/60698-2700 MHz
Ultra FlatMIMO2-port694-2700MHz
1978Motorola HT200Portable Two-Way Radio
1992Nokia 1011
1983MotorolaDynaTAC 8000x
2003Nokia
2010Samsung Galaxy 1
2013SamsungGalaxy S42012
Cisco Linksys e4200 Router
2012PEAR™ MIMOAntenna2002
Elster 2261ABB WAH Meter
Narrow Beam DirectionalPanel30/60694-2700MHz
Outdoor Canister10-port 24”1695-5950 MHz
Omni Whip4-port 60” x 2”1695-2180MHz
2014
20152016
2017
20172018
2018
DirectionalPanel30/30 4 Port1695-5950 MHz
3M Film
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C L E A R S I G N A L S . S O U N D I N V E S T M E N T S .
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Continued Investment in 4G-LTE and Rollout of 5G Network Will Drive Sustained Growth for Many Years to Come
1980 2000 201019901G 2G 3G
2020
Primary Services
4G - LTE 5G
Mobile broadbandDigital phone calls
Analogue phone calls
Maximum Downlink Speed
Sample Devices
Distinguishing feature
All IP services Lower latency rates, increased
flexibility
42.2 Mb/s 1,000 Mb/s 10,000 Mb/s1 Mb/sn.a.
Mobility Voice calls Mobile internet experience
Widespread adoption of broadband
internet
Connected devices
Source: GSMA Intelligence - Report on 5G, 451 Research Report - 5G: Innovation, Disruption and Opportunity Ahead(1) ABI Research Report(2) SNS Telecom Research - May 2017
Wireless carriers are expected to spend $61 billion annually on network infrastructure through 2020, the vast majority being 4G-LTE investments.(1) In addition, carriers are expected to spend $21 billion on the 5G network by the end of 2025(2)
Network Peak Date
Launch Date
2000 2020 20302010 2040
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Infrastructure Antennas Division
Wireless providers under increasing pressure to improve coverage and bandwidth
Baylin's products are integral to some of the most advanced DAS in the world
Growth opportunities driven by LTE network densification
Baylin has installed thousands of small cell systems
Current antennae not compatible with 5G
Baylin is leveraging its status as an approved supplier to capture market share in this fast growing market
Distributed Antenna Systems (“DAS”)
Small Cell Base Station Antennas
TAM - US$1.9B TAM - US$1.4BTAM - US$1.1B
Image Source: Qorvo – Small Cell Networks and the Evolution of 5G(1) EJL Wireless Research Report and ABI Research Report; Company estimates(2) Technavio – Global Small Cell Market 2017-2021 Report; Company estimates
Growth Drivers Today Future Growth Driver
(1) (2) (1)
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Galtronics Value –Small Cell Solutions Plus 5G
Small Panels for Fill-In Coverage
Multi-band Whips for Urban Coverage
Wide & Expanding Portfolio of Small Cell/Densification Solutions…
Galtronics is a leading supplier of Small Cell/Densification Antennas in North America
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Embedded & Mobile Antenna Divisions are Well Positioned to Contribute to Growth
Telecom and broadcast companies are now outfitting their set-top boxes with cellular capabilities, transitioning them into small cell-like devices
Baylin is one of few companies with the expertise to capitalize on this opportunity
Growth Drivers
Embedded Antennas Mobile Antennas
Growth Drivers
12+ year relationship with a large mobile handset OEM, Baylin is a tier-one antenna supplier
50% of the top North American wireless operators have signed Master Purchase Agreements (MPAs) with Baylin
12+ years of experience ~40 years of experience
Increased video and data streaming
Greater demand for high speed
Onset of wireless wearable devices
Increased communication between devices in the home and business
3+ new hardware OEMs added in 2017, including large Fortune 500 OEM
~90% of routers have shifted to embedded antenna solutions since Baylin changed the technology to internal solutions in 2007
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Embedded and Mobile
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ADVANTECH WIRELESSTECHNOLOGIES INC.
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Satellite Connectivity Products
Overview Representative End-Markets
Satellite communication is used to send signals long distances where the Earth’s curvature creates an obstruction.
Required in remote areas where there is an absence of wired or traditional networks.
(1) Grand View Research & RFC Market Research Future; Company estimates
Broadcast Government & Military
Enterprise & Corporate Oil & Gas
Direct-to-Home Satellite
Maritime & Cruise Ships
Wireless Communications
Homeland Security
Uplink Downlink
TAM - US$3.2B(1)
RF, microwave and antenna products are used in transmitting earth stations
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Manufacturing Locations: Dorval, CAN
Design & Sales: Duluth, GA; Sao Paulo, Brazil; Mexico City, Mexico;
Bogota, Colombia; Cambridge, UK 185 Individuals
Business Focus: Design & Manufacturing of Satcom Products SSPAs, BUCs, RF Converters, LNAs, Switching & Combining Aviation & Military RADAR System Engineering Integrated terminals – SNG, Flyaway, Earth Station
Markets: Defense Commercial Broadcast
Advantech Wireless Technologies
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Recent Acquisition of Advantech Significantly Expands Baylin’s Capabilities
Acquisition Highlights
Improves Gross Margin and EBITDA Margin
Enhances Baylin’s Fastest Growing Segment, Infrastructure
Provides Access to New Untapped Verticals and Expands Geographical Footprint
Meaningful Revenue and Cost Synergies
Advantech Profile
Designer and manufacturer of customizable RF and microwave products for highly specialized wireless communications markets
Millimeter wave and active component expertise
25+ yrs of significant innovations, including pioneering the use of Gallium Nitride (“GaN”) technology to create smaller, lighter, and more powerful products
160+ clients in over 150 countries and offices in North America, South America and Europe
All power levels (5 W to 6000 W)
All bands (C-Band to Ka-Band)
Expert in RF innovation, leading the industry shift to GaN technology
Frequency bands from 6 GHz to 38 GHz
Used mainly in satellite ground stations and wireless base stations
RF Division Microwave Division
Provides Entry into Satellite Connectivity Market
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ALGA
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Alga Products & Customers
CustomersProducts
Alga products include
– RF and microwave solid state power amplifiers
– Pulsed amplifiers for radar applications
– Transmitter and transceiver products
– RF passive components and systems
Product offering covers all major frequency standards
– Active components product offering covers L, S, C, X, Ku and Ka bands with frequencies that range from 2.0 GHz to 31.0 GHz with power level from 5W to 12kW
– Passive components product offering covers 500.0 MHz to 100.0 GHz
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Alga Acquisition Highlights
Acquisition Highlights
Enhances One of Baylin’s Faster Growing Segments, Satellite Connectivity Products Addition of Experienced Management
Accretive to EPS(1) Immediate Cost Saving Opportunities
Improves Gross Margin and EBITDA Margin
Improves Supply Chain and Procurement Capabilities
Revenue Synergies Driven by New Relationship with Tier 1 OEM
(1) Based on consensus research estimates
New State-of-the-Art Facility Creates Large Platform for Growth
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Alga Overview
FY 2018A Financial Summary(1)(2)Overview
Alga is a market leader in the engineering design and development of Radio Frequency and Microwave components
Fast product development cycle is a key success factor
– 4 weeks for passive components
– 3 months for active components
41 full-time equivalents as at March 31, 2018
Founded in 2003 and based in Kirkland, Quebec
Key Management
Michael PerelshteinPresident & CEO
Mr. Perelshtein is an experienced manager and operations professional, who holds countless relationships with OEMs and has significant expertise in the area of procurement
Mr. Perelshtein founded Alga in 2003 and has previous work experience at Wavesat Telecom, C-Mac / Selectron and GHz Technologies
Mr. Perelshtein holds a M.Sc.Eng and a BCom. Degree from Kazan State University
Frank PanarelloCOO & President, Trilogix EMS
Mr. Panarello is an experienced operations and finance professional, with over a decade of experience at Trilogix EMS. Prior to this role, he worked at Nortel Networks
Mr. Panarello holds an MBA from the Ivey School of Business at Western University and a Bachelor’s in Mechanical Engineering from McGill
$15.6M Revenue
(1) For the fiscal year ended March 31, 2018(2) This page contains non-IFRS measures. See “Disclaimer” on pages 2-3
$3.7M Adj. EBITDA
~49% Gross Margin
~24% Adj. EBITDA Margin
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BAYLIN TECHNOLOGIES-AUGUST 2018
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$8.9
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$4.4
$3.2
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Mobile Antennas Embedded Antennas Infrastructure Antennas Satellite ConnectivityProducts
Total Addressable Market
Addr
essa
ble
Mar
ket (
US$
B)
Baylin’s Key Addressable Markets are Large & Growing
Mar
ket
Gro
wth
~6% CAGR(1) ~3% CAGR(2)
(1) Statista, excludes BSA market; CAGR from 2017-2023 as per Research & Markets report(2) Global Market Insights - CAGR from 2016-2022; Company estimates
(3) EJL Research, ABI Research, Technavio; Company estimates(4) Grand View Research & RFC Market Research Future; Company estimates
20%+ CAGR(3) 16% CAGR(4)
~30% margin ~35% margin 40%+ margin 45%+ margin
Infrastructure and satellite, Baylin’s most profitable markets, are also the largest and the fastest growing.
(1) (2) (3)
(4)
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Innovation and R&D Expertise Are Baylin’sKey Competitive Advantage
Nimble Some of our competitors are too large to
compete on smaller products. Baylin is nimble enough to act as an extension of a customer’s R&D department.
Concept to Production We understand customer needs and
provide high quality custom solutions from concept to production.
Specialized R&D Centres With 4 R&D Centers we can creatively solve
challenging projects.
How Baylin Wins Clients High Barriers to Entry
Supplier Contracts Carriers, service providers and OEMs have
challenging qualification requirements.
Technology Expertise Baylin has industry-leading talent able to
design and develop products that meet customer specifications.
Best-In-Class Operations Highly-specialized, technologically advanced
manufacturing and test capabilities.
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Blue Chip Customer Base
Infrastructure Antennas Satellite Connectivity Products
Embedded Antennas Mobile Antennas
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Growth Strategy
Organic Inorganic
Actively seeking acquisitions which provide:
Expansion into more sophisticated product lines
Focus on driving down manufacturing costsNew geographical markets
Focus on innovation in each of Baylin’s four key segments
Technological capabilities
New OEM customersLeverage prime supplier status with large customers
Optimize working capital and costs, further driving margins
New verticals
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RE-RATING OF BAYLIN
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Q2-2018 SUMMARY INCOME STATEMENT
(CAD in 000's) Q2 Q1 Q4 Q3 Q2 Q1Revenue 32,578 29,438 24,351 27,140 20,349 19,801 Gross profit 13,048 10,562 7,178 8,424 6,801 5,942 as % of Revenue 40.1% 35.9% 29.5% 31.0% 33.4% 30.0%Operating costs 11,534 13,602 7,168 6,812 8,974 7,168 Operating income (loss) 1,514 (3,040) 10 1,612 (2,173) (1,226) Net income (loss) 292 (4,607) (257) 896 (3,205) (1,644) Income (loss) per share $0.01 ($0.14) $0.00 $0.04 ($0.15) ($0.08)Adjusted EBITDA 2,889 1,446 1,322 3,076 406 151
2018 2017
Sheet1
20182017
(CAD in 000's)Q2Q1Q4Q3Q2Q1
Revenue32,57829,43824,35127,14020,34919,801
Gross profit13,04810,5627,1788,4246,8015,942
as % of Revenue40.1%35.9%29.5%31.0%33.4%30.0%
Operating costs11,53413,6027,1686,8128,9747,168
Operating income (loss)1,514(3,040)101,612(2,173)(1,226)
Net income (loss)292(4,607)(257)896(3,205)(1,644)
Income (loss) per share$0.01($0.14)$0.00$0.04($0.15)($0.08)
Adjusted EBITDA2,8891,4461,3223,076406151
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CAPITAL MARKETS AND FINANCIAL SNAPSHOT
BYL-TO August 31, 2018
Price C$3.62
Market Capitalization
C$139.3m
Issued Shares : 39,803,181
Insider Ownership ~50%
B Y L .T O B a y l i n Te c h n o l o g i e s I n c . T S E
Baylin Technologies Inc.Exchange: TSX Exchange | August 31, 2018, 4:30 p.m.EDT
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IMPROVING RESULTS ALL FIGURES IN CANADIAN DOLLARS
Customer D ivers i f i cat ion
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IMPROVING RESULTS ALL FIGURES IN CANADIAN DOLLARS
Gross Prof i t /Marg in EV vs ADJUSTED EBITDA
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IMPROVING RESULTS ALL FIGURES IN CANADIAN DOLLARS
G R O S S P R O F I T/ M A R G I N T R A I L I N G T W E LV E M O N T H S
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Comparable Company Analysis
Currency Loca l
Date 8/3/2018
USD
Baylin Technologies Comps
In millions except per share data LTM EBITDA Rev CAGR
Company Name Price EV Margin 15A-19E 2016 2017 2018 2019 2016 2017 2018 2019 2016 2017 2018 2019
Antenna
Amphenol 93.84 30,631 23.6% 4.2% 4.9 x 4.4 x 3.9 x 3.7 x 20.9 x 18.4 x 16.4 x 15.3 x 34.5 x 30.1 x 26.0 x 23.6 x
CommScope 31.60 9,903 20.1% 2.1% 2.0 x 2.2 x 2.1 x 2.0 x 8.8 x 10.1 x 10.2 x 9.6 x 12.0 x 14.8 x 13.2 x 11.9 x
La i rd Plc 2.00 1,477 12.1% 2.8% 1.4 x 1.2 x 1.1 x 1.1 x 11.8 x 9.6 x 9.6 x 8.6 x 19.1 x 18.0 x 19.0 x 16.8 x
Partron 7,070.00 381 11.5% 4.8% 0.5 x 0.5 x 0.5 x 0.4 x 4.7 x 6.9 x 6.3 x 5.0 x 16.9 x 306.6 x 20.0 x 11.5 x
TE Connectivi ty 92.51 35,474 21.3% 3.9% 2.9 x 2.7 x 2.4 x 2.3 x 14.1 x 12.5 x 11.3 x 9.8 x 22.7 x 19.2 x 16.6 x 15.4 x
RF & Component Suppliers
Airga in 9.40 59 0.9% 24.7% 1.4 x 1.2 x 1.0 x 0.9 x 12.8 x nmf nmf nmf 23.5 x 30.3 x nmf 44.8 x
Qorvo 84.41 10,767 32.9% 4.3% 3.6 x 3.6 x 3.3 x 3.1 x 12.0 x 11.8 x 9.9 x 8.5 x 18.5 x 16.5 x 13.6 x 11.9 x
Semtech 48.65 3,139 18.8% 5.4% 5.8 x 5.3 x 4.8 x 4.3 x 19.9 x 17.4 x 14.5 x 12.6 x 35.3 x 26.0 x 22.2 x 18.8 x
Skyworks 95.62 15,572 41.8% 3.0% 4.7 x 4.3 x 4.0 x 3.8 x 10.8 x 9.9 x 9.3 x 8.6 x 17.2 x 14.8 x 13.3 x 12.1 x
u-blox 183.90 1,249 21.2% 7.4% 3.5 x 3.1 x 2.7 x 2.3 x 15.3 x 14.4 x 12.6 x 10.4 x 27.1 x 24.3 x 22.7 x 19.5 x
Average 2.3 x 2.2 x 2.0 x 1.9 x 9.8 x 11.5 x 10.8 x 9.7 x 21.0 x 20.5 x 19.0 x 15.8 x
Median 2.0 x 2.2 x 2.1 x 2.0 x 11.8 x 10.1 x 10.2 x 9.6 x 19.1 x 19.2 x 19.0 x 15.4 x
Baylin Technologies (PCI) 3.49 111 5.7% 36.5% 1.3x 1.2x 0.8x 0.7x 165.7x 22.3x 7.2x 4.5x nmf nmf 133.2x 12.2x
Notes:
Ruckus Wireless (RKUS)
P/EEV/EBITDAEV/Sales
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35T H E T I M E F O R B A Y L I N I S N O W .
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