Management Presentation March 2013 - Welcome to API ... · Management Presentation March 2013. ......
Transcript of Management Presentation March 2013 - Welcome to API ... · Management Presentation March 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 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 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 (2/28/13): $2.61
52-Week High / Low: $2.31 / $4.10
Shares O/S Basic/Diluted: 54.8 million / 62.3 million
Market Cap: $143 millionMarket Cap: $143 million
Enterprise Value: $332 million
LTM Revenue(1): $281.0 million
LTM EBITDA(1): $39.6 million
LTM CAPEX(1): $1.2 million
(1) LTM period ending November 30, 2012
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• Dominant RF/microwave, microelectronics, and
security technology provider in defense and
commercial high-reliability markets
– 90%+ sole/primary source with recurring revenue streams
– Broad portfolio of highly engineered technology products
INVESTMENT HIGHLIGHTS
– Alignment with growth areas of the Defense budget and
within high-reliability industrial markets
• Focus on revenue generation and profitability
– Target of 20% Adjusted EBITDA company wide
– Demonstrated ability to generate cash
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• Provider of RF/microwave, microelectronics, and
security technologies for the defense, aerospace,
and commercial industries
• Founded in 1981; Re-launched the new API with
new vision in 2011
– Significant acquisition activity in 2011
Today, one of the largest “non-prime” provider of
COMPANY OVERVIEW
– Today, one of the largest “non-prime” provider of
RF/Microwave and microelectronics
• 2,200 employees world-wide
• 3,000 customers world-wide
• Revenue breakdown
– ~75% Domestic / 25% International
– ~60% Defense & Government / 40% Commercial
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OUR MARKETS & CUSTOMERS
U.S. U.S. DoDDoD
45%
• Radar
• Military aircraft
Missile defense
Medical, Industrial & Medical, Industrial &
Commercial AerospaceCommercial Aerospace
22%
• Medical devices
• Commercial air
• Alt. Energy
Commercial & Commercial &
CommunicationsCommunications
22%
• Mobile devices
• Wireless
communications
Government & Government &
SecuritySecurity
11%
• Secure
communications
Secure access
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LTM Ended November 30, 2012
• Missile defense
• SATCOM
• C4ISR
• UAVs
• Alt. Energy
• Downhole
• Transportation
communications
• Satellites
• Enterprise
systems
• Secure access
• Encryption
RF/Microwave & Microelectronics
38.4%
Electromagnetic Integrated Solutions (EIS)
18.6% 9.3%
Sensors Products
ATTRACTIVE PRODUCT PORTFOLIO
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Power & Systems Solutions
5.6%
Secure Systems &Information Assurance (SSIA)
8.0%
Electronics Manufacturing Services (EMS)
21.0%
LTM-Ended November 30, 2012
SSC
Key:
Systems, Subsystems & Components (SSC) Segment SSIA Secure Systems & Information
Assurance (SSIA) Segment EMS Electronics Manufacturing Services (EMS) Segment
WELL POSITIONED SUPPLIER AT
EVERY STAGE OF VALUE CHAINCompelling Go-to-Market Strategy
For Top-Line Growth:
• Unified sales strategy harnesses strength of
company’s broad product portfolio
• Opportunities for adjacent sockets
• Leverage long-term relationships and
“Preferred Supplier” status
• API as a trusted “One Stop Shop”
for customers looking to MULTI-CHANNEL ACTIVE ANTENNA ARRAY MODULES
SOFTWARE / HARDWARE ENCRYPTION
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for customers looking to
streamline supplier base
BUILD TO PRINT
COMPONENTS
HYBRIDS
SINGLE-FUNCTION ASSEMBLIES
MULTI-FUNCTION ASSEMBLIES
INTEGRATED MICROWAVE ASSEMBLIES (IMA)
• Defense electronics continue
to grow at an annual rate of 3%
• One Stop Shop: Partner with
Primes as they consolidate their
supply chain
DEFENSE & GOVERNMENT
INDUSTRY DYNAMICS
supply chain
• Upgrade vs. Buy New: API is
incumbent supplier with
40+ years of heritage
• Continued growth in foreign
military sales
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COMMERCIAL MARKET
INDUSTRY DYNAMICS
• Focus on high-reliability applications
• Non-defense niche applications aligned with growth markets
Key supplier to all major commercial airline
platforms
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Commercial Aerospace
platforms
Sole/primary source supplier for medical and
industrial products and platformsMedical & Industrial
Expanding presence in energy markets
(oil and gas, alternative energy)
Energy
27.6%
7.6%
6.9%6.8%
3.7%1.9%%
DIVERSITY OF PROGRAMS/PLATFORMS • Program diversity offers protection against sequestration
• Each of Top 25 programs $750K+ revenue on an LTM basis
• Top 25 programs combined account for 21% of LTM revenue
• No individual program higher than 3% of LTM revenue
• Program alignment with DoD funding
• Program concentration in targeted technology areas Secure CommunicationSecure Communication
Military AircraftMilitary Aircraft
Radar ProgramsRadar Programs
Electronic WarfareElectronic Warfare
Weapons ProgramsWeapons Programs
24.4%10.7%
10.4%
7.6%
LTM-Ended November 30, 2012
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Missile ProgramsMissile Programs
Industrial ProgramsIndustrial Programs
Weapons ProgramsWeapons Programs
CommunicationsCommunications
& Wireless& Wireless
Classified ProgramsClassified ProgramsOther
21%
79%
Top 25
Programs
Other
API’S PRODUCTS ON KEY DOD/GOVERNMENT
PLATFORMS & PROGRAMS
Secure Communication
Missile Programs
Military Aircraft
C4ISR
• ID Friend or Foe
RadarPrograms
ElectronicWarfare
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• Hellfire• Patriot• AEGIS• AMRAAM• APR-39• HTS/HARM• JDAM• LRAS• Maverick• Excalibur• PAC-3• JDAM• Stinger• THAAD• Tomahawk
• Eurofighter Typhoon• CH-47 Chinook• 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• 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• Paveway• Spider• Sniper Pod
FEATURED PRODUCTS
400Hz UAV PDU
EISPower & Systems
Solutions
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ION™ SA5600Secure ApplianceUsed by Verizon Business™ and Avaya® Fortune 500 companies to provide third-party access to critical information systems
Secure Communication HubOn-the-go secure communications via 3G or satellite
Intelligent Power Monitoring DevicesRemote power monitoring and re-boot for critical networking systems
400Hz UAV PDUSpecialized power management unit for Unmanned Aerial Systems (UAS)
High gAccelerometerPlug-and-play, pre-calibrated accelerometer for shock testing
65210 SensorSelf-contained 6DoF (Six Degrees of Freedom) kit for Aircraft Stores Separation Testing
EMI/EMC FiltersOne of the world’s largest line of EMC/EMI filtering products(Shown here: Mini Solder-in Feed-thru filters)
Custom MagneticsTop supplier of custom magnetics for critical military and transportation applications
GaN Power AmpsUltra broadband power amplifiers For use in Electronic Warfare, Radar & C4ISR applications
AESA Radar ModulesMicrowave modules for use in next-generation Radar
LONG-STANDING CUSTOMER BASE
• Long-standing, deep relationships
built on customer collaboration
• No customer over 7% of revenue
• Over 3,000 end customers
• Serve all the key defense
contractors and broad range of
Top 10 customers in alphabetical order
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
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LTM-Ended November 30, 2012
• $77 million in bookings with Book-to-Bill ratio of 1.2 to 1
• Expanded sales funnel to $212 million
• Achieved EMS business turnaround: Stabilized EMS EBITDA and
positioned business unit for top line growth and profitability
• Backlog of $155 million at end of Q4
• Featured customer wins:
Q4 BUSINESS HIGHLIGHTS
• Featured customer wins:
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$6.2 million order for
Electronic Warfare (EW)
integrated assemblies for
use in major DoD platform
$1.7 million order for
High Power Small Signal
amplifiers for use in DoD
platform
$2.4 million order for critical
Circuit Card Assemblies for use in
Department of Defense Electronic
Warfare program
• Rationalized and streamlined multiple companies/product
lines/cultures into one company with six technology product
groupings
• Profitable every quarter (Adj EBITDA Range 12-15%), notwithstanding
defense industry headwinds
• Generated $9 million in cash from operations
• Implemented additional $17.5 million in net annual cost reductions in
FY2012 HIGHLIGHTS
• Implemented additional $17.5 million in net annual cost reductions in
FY12, with a total of $36 million for last seven quarters
• Launched 35 new, major product lines in FY2012, including AESA
radar products and Power Amps – propelling API Technologies up the
value chain
• Key wins on major Military Aircraft, Electronic Warfare and Radar
platforms
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OUR
FOOTPRINT
• Certified facilities, including:- MIL-PRF-38534
(Class H and K)- AS9100 Rev C- ISO 9001:2008
(All manufacturing facilities)
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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 IN $MMKey Points
• May 2011 Ending Quarter includes Legacy API and SenDEC
• August 2011
Ending Quarter
includes
Spectrum
Control
• February 2012
Ending Quarter
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Ending Quarter
includes CMT
• May 2012 Ending
Quarter includes
RTIE and C-MAC
• August & Nov
2012 Ending
Quarter has no
new acquisitions
QUARTERLY REVENUE TREND BY SEGMENT IN $MM
Key Points
• EMS Revenue
decline due to
graceful exit of
low and negative
margin business;
positive Book-to-
Bill in Aug 2012
and Nov 2012
• SSIA has a lumpy
revenue profile;
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revenue profile;
Canada and UK
gov’t fiscal year
end in May-
ending quarter
• SSC average
revenue for the
past 4 quarters is
about $50mm
QUARTERLY ADJ. EBITDA IN $MM AND % OF REVENUE
Key Points
• Profitable EBITDA range of 12-15% in FY12, despite defense industry headwinds
• Non-EMS margin: 16% in Nov 2012 quarter
• Overall EBITDA %
20
• Overall EBITDA %
Goal: 20%
• EMS EBITDA %
Goal: 10%
BALANCE SHEET(1)
Assets (in $ millions)
Cash & cash equivalents $21.2
Accounts receivable $45.2
Inventory $68.0
Other $3.8
Liabilities & Shareholders’ Equity (in $ millions)
Accounts payable & accrued expenses $41.5
Current debt $2.3
Other $0.4
Total Current $138.2
Fixed assets $42.7
Goodwill, intangibles & other $215.4
Total $396.3
Total Current $44.2
Long-term debt & other $184.1
Deferred taxes $3.4
Total Liabilities $231.7
Total Shareholders’ Equity and other $164.6
Total $396.3
(1) As of November 30, 2012
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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
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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
• Dominant RF/microwave, microelectronics, and
security technology provider in defense and
commercial high-reliability markets
– 90%+ sole/primary source with recurring revenue streams
– Broad portfolio of highly engineered technology products
INVESTMENT HIGHLIGHTS
– Alignment with growth areas of the Defense budget and
within high-reliability industrial markets
• Focus on revenue generation and profitability
– Target of 20% Adjusted EBITDA company wide
– Demonstrated ability to generate cash
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RECENT ACQUISITIONS
Founded
1981
• Began as small electronics firm
• Investment by Vintage Capital in January 2011
Acquired
March 2012
UK-based designer and manufacturer of RF and microwave filters,
multiplexers and related products for DoD, industrial, and
commercial aerospace markets
Acquired
March 2012
A leading provider of passive components to audio, defense,
aerospace, and industrial markets
2012
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March 2012 aerospace, and industrial markets
Acquired
November 2011
Designer and manufacturer of RF and microwave filters,
multiplexers and related products for satellites and
communications
Acquired
June 2011
Leading provider of RF/microwave, EMI filter products, sensors
and power products (NASDAQ: SPEC)
Acquired
January 2011
Electronics Manufacturing Services (EMS) provider for major
government programs
2011