Argon ST, Inc. CORPORATE PRESENTATION. August

Transcription

1 Argon ST, Inc. CORPORATE PRESENTATION August 2008

2 Safe Harbor Statement With the exception of historical information, the statements set forth in this presentation include forward-looking statements that involve risk and uncertainties. The company wishes to caution that a number of important factors could cause actual results to differ materially from those forward-looking statements. These and other factors which could cause actual results to differ materially from those in the forward-looking statement are discussed in the company s filing with the Securities and Exchange Commission, including its filings on forms S-4, 10-K, and 10-Q. 2

3 Agenda About Argon ST Argon and the C5ISR Market Business Model and Financial Overview Key Opportunities Program Highlights 3

4 Investor Snapshot Corporate Headquarters Ownership Fairfax, VA Public: NASDAQ (STST) Founded / History Argon-Sensytech merger 2004 Argon Engineering Assoc., Inc Sensytech (and predecessors) 1968 Fully Diluted Shares Outstanding million 1 Insider Ownership Approximately 40% 2007 Revenue $282 million 2008 Revenue Guidance $ million Employees 970 as of September 30, % possess security clearances 30% of technical staff have Masters or PhD 75% of technical staff are software engineers Key Program/Opportunities SSEE, SSTD, OT-TES, EPX, Guardrail Notes: 1: As of March 30,

5 Argon ST We provide systems and services to the command, control, communications, computers, combat systems, intelligence, surveillance and reconnaissance (C5ISR) market $80 billion+ market place New threat environments continue to create need for intelligence Prime on 83 percent of contracts (2007 revenue) We strategically focus on the following markets: Maritime Airborne Tactical Communications and Networking Ground Global Security / International / Other We differentiate ourselves by Designing, developing and delivering technically advanced systems and capabilities Installing and supporting our systems on platforms in operational environments 5

6 Investment Highlights Well positioned in SIGINT Argon s objective is to be a national asset We participate in programs of national importance Our technical capabilities are recognized as world-class We are a premier C5ISR company Speed to market COTS-levered business model Highly productive, technically skilled, and cleared workforce Significant backlog Backlog weighted toward desirable classified work Strong opportunity pipeline Areas of concentration in the defense sector are strong and growing Double digit top line growth targets Organic growth and disciplined acquisitions Increased market share and growth of C5ISR market Proven and incented management team with significant industry experience 6

7 Making Sense of It All Argon and the C5ISR Market We target the entire C5ISR market with a range of capabilities and solutions In a sophisticated and complex market Argon approaches each opportunity with a life cycle approach leveraging technology advances and incumbency 7

8 Sensors and Systems Our sensors perform on land, at sea, and in the sky Surface ships Submarines Aircraft/UAV Airborne-remote Land-based platforms (mobile and fixed) They also span the entire signals intelligence and sensor arena, including: Communications Intelligence (COMINT) Electronic Signals Intelligence (ELINT) Acoustic Imaging (IMINT) 8

9 Core Capabilities Signals Intelligence Information Operations Collecting information and producing intelligence from the detection, interception and evaluation of signals, including communication signals ( COMINT ) and electromagnetic signals, such as radar ( ELINT ). Employment of non-lethal measures to exploit, influence and manipulate an enemy s C5ISR processes, including radio and network communications, to protect own force and friendly information and sensors. 9

10 Core Capabilities (cont.) Electronic Warfare Acoustic Sensing and Countermeasures Detecting, identifying and countering adversary forces, weapons and sensors through collection of adversary signals. Measures include launching deceptive signals and electronic counter-measures and using electronic support measures ( ESM ) to identify and locate emitters on both platforms and weapons. Employment of acoustic sensors and signals to detect, identify and counter undersea threats including, but not limited to, enemy torpedoes. 10

11 Core Capabilities (cont.) Tactical Communications and Networking Threat Simulation Imaging Deployment of mobile, terrestrial, and satellite radio receivers and transmitters, to include point to point links and extensive networks, supporting tactical operations, intelligence production and dissemination, movement of data and information, and management of the radio frequency spectrum. The use of computer and virtual based replication of signals and sensors for training and analysis of adversary capabilities. Production and analysis of information from light spectrum sources, including multispectral, hyperspectral, infra-red, electro-optical and visible light. 11

12 Our Business Model Program Lifecycle ~3-5 year duration Cost (~6-9+% margins) Cost & Fixed Fixed (~12-15% margins) Fixed & Cost We approach each program with a lifecycle process which ensures optimal opportunity for long-term relationships with high margin production content 12

13 Contract Mix (By Contract Type) Future 9 Months Forecast 60-75% Fixed/T&M 20% 30% 40% 50% 60% 70% 80% Fixed/T&M 13

14 C4ISR Market ( CAGR) 6.0% 4.0% 4.87% 2.0% 1.1% 0.0% Total DoD Spending C4ISR Spending Source: F&S C4ISR is a growth market expected to outpace other DoD budget growth RDT&E is declining by 3.6% (CAGR) over this same period Global C4ISR market is ~$800 billion over the next decade 14

15 Diversified Revenue Base Customers (FY2007) Other US 22% Int'l 6% Army 11% Navy 61% Not expected to be less than 50% in future 15

16 Revenue Growth Back on Track (in $millions) $ $271.8 $258.8 $ $ $61.8 $ Note: As reported, 2008 guidance midpoint 16

17 300 Backlog Provides Visibility for Future Growth $305 (in $millions) 250 $229 $211 1 $ $ $ Funded Unfunded Note: Excludes ACS 17

18 Solid Operating Income and Adjusted EBITDA (in $millions) Operating Income $34.4 $ $ $ Adjusted EBITDA $38.9 $38.2 $38.5 $ $5.5 $8.3 $ $5.5 $6.4 $ Notes: 1. FAS 123R adopted Non-GAAP excluding impairment & other one-time charges Guidance Midpoint Adjusted EBITDA is a non-gaap measure defined as earnings before interest, taxes, depreciation, amortization, stock-based compensation, acquisition related retention, and excludes impairment of intangible assets and other one-time charges 18

19 FY 2008 Off to a Great Start (in $millions, except share and per share amounts) For the Nine Months Ended 29 June July 2007 Revenue $ $ Operating Income 23.6 (9.6%) 20.6 (10.4%) Adjusted EBITDA (1) 32.9 (13.4%) 27.8 (14.0%) Net Income Fully Diluted Shares Earnings per share, fully diluted $ 0.68 $ 0.60 Backlog Note: 1. Adjusted EBITDA is a non-gaap measure defined as earnings before interest, taxes, depreciation, amortization, stock-based compensation, acquisition related retention, and excludes impairment of intangible assets and other one-time charges 19

20 Strong and Stable Balance Sheet Making Sense of It All ASSETS Cash and cash equivalents Accounts receivable Other current Property, equipment and software, net Goodwill Intangibles & Other assets TOTAL ASSETS 29 Jun 2008 $ $ Sep 2007 $ $ LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable and accrued expenses Deferred revenue Other current Other liabilities Equity TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ $ $ $

21 Business Focus Build new capabilities in the C5ISR area Alignment with military modernization and transformation Advanced technology offerings; recognized as world class Target opportunities as a prime contractor (83% of 2007 revenue) Grow the company at double digit rates over consecutive years Organic growth via diversification of customer base and expansion of current programs Synergies with acquisitions creating cross-market opportunities Opportunistic and disciplined acquisitions Broad diversification of customers and programs Strong customer satisfaction Increase profitability and shareholder value Record backlog with significant long-term visibility Improve program performance/execution Create operational efficiencies Strengthen management team Meet expectations, 2008 Guidance: Revenues from current operations: $325 - $345 million Operating income: $29 - $34 million Adjusted EBITDA: $41 - $46 million 21

22 KEY OPPORTUNITIES

23 Key Opportunities Making Sense of It All Maritime Ships Signal Exploitation Equipment (SSEE) Increment E continued production Increment F development and production Surface Ship Torpedo Defense programs 25-A, 25-C and 25-D Mark 54 torpedo acoustic homing sensor Foreign U.S. Coast Guard Airborne Guardrail modernization (Northrop Grumman) EPX Pursuit (Boeing) Banshee subsystem for the EP-3E Bombardier Aerospace CL215T and CL415 Water Bomber fleet UAV collection missions 23

24 Key Opportunities (cont) Making Sense of It All Tactical Communications & Networking Operational Test-Tactical Engagement System (OT-TES) Common Range Integrated Instrumentation System Rapid Prototype Initiative (CRIIS-RPI) Ground Mobile Gateway USAF Objective Gateway programs Ground Two major ground transportable systems USMC Combat Operations Center (COC) Security Base security for key international customer Department of Homeland Security border protection 24

25 PROGRAM HIGHLIGHTS

26 Tactical Communications Highlights Operational Test Tactical Engagement System (OT-TES) a mobile, high-fidelity, secure tactical engagement simulation and field instrumentation networking system Awarded low rate initial production in 2007 and additional R&D in 2008 Awarded Common Range Integrated Instrumentation System Rapid Prototype (CRIIS-RPI) win reinforces technology Working to make our technology standard for all test ranges Ground Mobile Gateway AF/ANG ground mobile system that provides relay among multiple platforms with different radios Key capability for Objective Gateway program Teamed with GD on near term GMG competition Several other competitions as follow-on Combat Operations Center (COC) USMC system for rapidly deployable operations center Provides key C2 among deployed operations Expect solid funding in 2008 for continued development 26

27 Ground Highlights Making Sense of It All Lighthouse based ground systems going into operation in 08 Soothsayer - UK Army/Marines (sub-contractor to Lockheed) Enhanced Trackwolf US Army mobile systems Barranjoey Australian Army New generation of technology Very advanced capability compared to other land mobile systems Significant performance improvements over fielded equipment Provides SIGINT into Distributed Ground Control System - Army Provides entry to diversify our customer base to Army, Marine, and SOCOM forces 27

28 Airborne Highlights Awarded contract for spiral upgrade on the EP-3 surveillance aircraft using Lighthouse architecture Partnered with Boeing on EPX competition Demonstrated DF and signal processing techniques (in flight) Selected for High Band COMINT spiral upgrade of Guardrail program Developed and tested pointing gimbal for UAVs Delivered Gen-5 system to Rivet Joint Received contract from Bombardier for manufacture of cable and electronic assemblies Demonstrated multi-int capability on UAV Demonstrated pod based information operations and special operations on F/A-18 Developed modification of C-130 to support C4ISR pod 28

29 Maritime Highlights Ships Signal Exploitation Equipment Continued production of Increment E Continued development of Increment F Service Oriented Architecture Significant top-side improvements Demonstrated frequency extension to support radar electronic support measures (RESM) Approved for Coast Guard use Delivered first Royal Australian Navy system Radar ESM expansion efforts Development of system for international customer Development system for LCS and pursuit of new US Navy platforms Surface Ships Torpedo Defense Completed development and testing for SLQ-25C approval Continued R&D for SLQ-25D generation Planned target to be WSC-11 supplier Won one of three MK-54 torpedo seeker phase 1 awards 29

30 Emerging Areas Base and infrastructure security systems Satellite communications US programs Commercial applications International opportunities for SIGINT applications Core capabilities to US allies Direct sales and FMS C4ISR training and logistic support Counter-sniper systems 30