Norsat International Inc.

Transcription

1 Norsat International Inc. TSX: NII OTC BB: NSATF Investor Presentation August 2014 Copyright 2014 Norsat International Inc.

2 Forward Looking Statements Statements in this presentation relating to matters that are not historical fact are forward-looking statements. These are based on current expectations, forecasts and assumptions that involve risks and uncertainties that could cause actual outcomes and results to differ materially from those outlined in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to: general economic conditions, changes in technology, reliance on suppliers, managing rapid growth, global sales risks, limited intellectual property protection, competition, mergers and strategic transactions by competitors, the continued availability of existing bank loans and credit facilities and other risks and uncertainties described in Norsat s public filings with securities regulatory authorities. While all efforts are made to ensure the accuracy of the information, Norsat assumes no liability for incorrect, incomplete, or missing information from this presentation. Past performance is not necessarily indicative of future performance. Copyright 2014 Norsat International Inc. 2

3 Company Overview Norsat International, Inc. (TSX: NII; OTC BB: NSATF) provides innovative communications solutions for remote and challenging applications used by: Government Services Public Safety Resource and Marine Transportation Search and Rescue News Organizations Military Satellite Communications 2013 Sales by Category $13.9 Focused on Satellite Communications and Land Mobile Radio (LMR) Land Mobile Radio $22.5 Dollar figures in millions. *Satellite Communications includes historical Satellite and Microwave segments; LMR includes Sinclair Copyright 2014 Norsat International Inc. 3

4 Company Highlights 11% Q214 Revenue Growth 38% TTM Gross Margins 17% TTM EBITDA Margin $0.09 TTM Earnings per Share 7 Consecutive Years of Profitability $US Millions $19.8 $37.8 Revenue $42.4 $36.4 $ TTM June 2014 Second Quarter 2014 Highlights Second quarter revenue was up 11% to $9.6 million, compared to $8.6 million during the same period in 2014; Adjusted EBITDA increased to $1.3 million, compared to $0.8 million in Q2 2013; Operating expenses decreased 9.1% during the quarter despite an 11% increase in revenues, driving a 166% increase in Operating earnings during the second period to $1,047,000; Basic and diluted earnings per share for the second quarter were $0.02 compared to $0.02 in the second quarter of 2013; The company ended the second quarter with $3.2 million in cash and $16.3 million in net working capital, excluding acquisition loan. $US Millions $10 $9 $8 $7 $6 $5 $4 $3 $2 $1 $0 $2.8 Adjusted EBITDA $4.2 $4.8 $5.1 $ TTM June 2014 Copyright 2014 Norsat International Inc. 4

5 Turnaround Story Now Executing Save the Company Capital Improvement Expansion SEP 2006 Dr. Amiee Chan installed as new CEO; Company losing $4-5 M per year DEC 2007 Awarded IDIQ order from DoD SEP 2008 SEP 2009 Cash position of $7.2 M SADI award $5.97M repayable MAR 2010 Awarded $1.7M contract with European military APR 2013 Acquired CVG Inc., opens new products within Satellite Communications Division OCT 2010 Purchase order of $4.2 M+ for satellite terminals LATE 2012 Launch maritime equipment and service bundle; Satellite locator App for iphone and Android JAN 2011 Norsat acquires Sinclair; adding Land Mobile Radio Division FEB 2014 Secures $1.5M standing order for antennas OCT 2013 Awarded order of $3.2 M from Harris Corp. for ATOM Copyright 2014 Norsat International Inc. 5

6 Industry Leader in Niche Market Segment Compelling Market Trends To Expand Communications Footprint Integrated Product Offerings to Meet the Unique Needs of Customers Strong International Presence with Elite Customer Base New Product Opportunities Providing Added Growth Proven Track Record of Successful Acquisition Integration Strong Cash Flows and Effective Cost Controls Copyright 2014 Norsat International Inc. 6

7 Target Industries Norsat is an industry leader in providing unique and customized communications solutions for remote and challenging applications. Remote Location Military Resource Transportation Maritime Public Safety Estimated $500M annualized market opportunity within the remote and challenging communications applications segment Norsat is NOT focused on the low cost, high volume communications market Copyright 2014 Norsat International Inc. 7

8 Remote and Challenging Applications Mission Critical Communications Public Safety Transportation Security and Defense Infrastructure Non-existent/ Insufficient or damaged Developing nations and communities Remote and/or harsh environments (e.g. Oil & Gas or Mining camps) Transportation/Maritime industries (e.g. On-the-Move applications) Disaster relief and response Military in theatre Photo: Norsat equipment is used throughout many major cities for public safety, transportation & commercial communications. Photo: Norsat NewsLink System used after 2010 Haiti Earthquake Copyright 2014 Norsat International Inc. 8

9 Competitive Advantages Known for customized solutions tailored to unique customer needs. Ruggedized and extremely durable Products are highly reliable in remote and challenging environments Platform technology that allows for quick customization tailored to meet the needs of customers Have what they want, when they want it Innovative smaller and faster applications Copyright 2014 Norsat International Inc. 9

10 Engineering Expertise Leading-edge designs & extensive technology expertise. Flexibility to adapt to each customer s unique needs and provide quick turnaround. Copyright 2014 Norsat International Inc. 10

11 Industry Leader in Niche Market Segment Compelling Market Trends To Expand Communications Footprint Integrated Product Offerings to Meet the Unique Needs of Customers Strong International Presence with Elite Customer Base New Product Opportunities Providing Added Growth Proven Track Record of Successful Acquisition Integration Strong Cash Flows and Effective Cost Controls Copyright 2014 Norsat International Inc. 11

12 Strong Growth in Market Trends There is a growing expectation that organizations and individuals are always connected to some type of communications infrastructure, regardless of where they may be. Copyright 2014 Norsat International Inc. 12

13 Industry Leader in Niche Market Segment Compelling Market Trends To Expand Communications Footprint Integrated Product Offerings to Meet the Unique Needs of Customers Strong International Presence with Elite Customer Base New Product Opportunities Providing Added Growth Proven Track Record of Successful Acquisition Integration Strong Cash Flows and Effective Cost Controls Copyright 2014 Norsat International Inc. 13

14 Product Area Focus Satellite Solutions Norsat s highly customized products and solutions are designed to be utilized in some of the most remote and challenging applications around the world. 38% of 2013 Sales Satellite Communications Microwave Products RF Conditioning Products 62% of 2013 Sales Land Mobile Radio Antennas Copyright 2014 Norsat International Inc. 14

15 Land Mobile Radio (Sinclair) Industry leader in providing highly reliable and durable antennas and RF conditioning products and solutions for over 60 years under the Sinclair Technologies brand Portfolio offering over 2,000 distinct products, including base station antennas, mobile/transit antennas, covert antennas, filters, receiver multicouplers, and accessories Diverse customer base, serving the public safety, defense, security, natural resources and transportation industry $US Millions $25 $24 $23 $22 $21 $20 $19 $18 $20.2 LMR (Sinclair) Revenue $24.2 $22.5 $ TTM June 2014 Revenues: 60-65% of total Margins: 40-45% Copyright 2014 Norsat International Inc. 15

16 Satellite Communications Product portfolio of microwave components includes a comprehensive range of satellite receivers (LNBs), transmitters (BUCs), transceivers, and solid-state power amplifiers (SSPAs) Fixed and transportable satellite terminals that can provide reliable video, voice and data connectivity anywhere in the world $US Millions $25.0 $20.0 $15.0 $10.0 $5.0 $0.0 $19.8 Satellite Communications Revenue $17.6 $18.3 $13.9 $ TTM June 2014 Several product offerings and growing portfolio with new products from IP acquisition in 2013 ATOM Series BUCs and SSPAs Products used for ground, marine and airborne applications Transmit Receive Revenues: 35-40% of total Margins: 40-45% Copyright 2014 Norsat International Inc. 16

17 Revenue Breakdown by Division Land Mobile Radio Satellite Communications $25 $24.2 $22.5 $22.9 $25 $US Millions $20 $15 $10 $20.2 $US Millions $20 $15 $10 $17.6 $18.3 $13.9 $15.3 $5 $5 $ TTM June 2013 FY12 $ TTM June 2013 FY13 Satellite Comm. $ % Satellite Comm. $ % LMR $ % LMR $ % US Dollar figures in millions. Copyright 2014 Norsat International Inc. 17

18 Industry Leader in Niche Market Segment Compelling Market Trends To Expand Communications Footprint Integrated Product Offerings to Meet the Unique Needs of Customers Strong International Presence with Elite Customer Base New Product Opportunities Providing Added Growth Proven Track Record of Successful Acquisition Integration Strong Cash Flows and Effective Cost Controls Copyright 2014 Norsat International Inc. 18

19 International Presence Global Offices Vancouver, BC- HQ, Sales, R&D, Manufacturing Aurora, ON- Sales, R&D, Manufacturing Other Sales Offices Lincoln, UK Cambridge, UK Los Angeles, CA Montreal, QC Monaco, FR Hamburg, NY Parsippany, NJ Jacksonville, FL Baltimore, MD International Network of Distributors Copyright 2014 Norsat International Inc. 19

20 International Presence Products sold in 90 countries Revenue by Geography $25 $24.3 $ sales offices $21.4 $21.7 Network of 300+ Resellers spanning the United States, Europe, Middle East, Africa, Asia & Latin America Serving 20+ Militaries and Government Organizations $US Millions $20 $15 $10 $8.6 $7.8 $7.6 $10.5 $8.5 $8.4 $6.2 $6.0 $5 $ TTM June 2013 U.S. Canada ROW Copyright 2014 Norsat International Inc. 20

21 Select List of Customers Telecom Media Government Transportation Commercial Resources/Utilities Copyright 2014 Norsat International Inc. 21

22 Industry Leader in Niche Market Segment Compelling Market Trends To Expand Communications Footprint Integrated Product Offerings to Meet the Unique Needs of Customers Strong International Presence with Elite Customer Base New Product Opportunities Providing Added Growth Proven Track Record of Successful Acquisition Integration Strong Cash Flows and Effective Cost Controls Copyright 2014 Norsat International Inc. 22

23 Growth Opportunities: Satellite Comm. ATOM Block Upconverters and Solid State Power Amplifiers Developed with IP acquired in 2013 Key features and competitive edge: Size, much smaller Up to 85% smaller than equivalent products Weight, lightest available Up to 90% less than competing products Ultra efficient/less power consumption Ideal for applications such as Airborne, Comms-on the Move, and replacement of tube amplifiers Received multi-million order from Harris Corp. (NYSE: HRS) Developing next generation Ka-band version, planned launch in 2015 Revenue potential for ATOM estimated to be $50M Copyright 2014 Norsat International Inc. 23

24 Growth Opportunities: ATOM Comms-on-the-Move Radar Solutions BUCs and SSPAs for unmanned ISR, ground vehicles, manned aircraft and flyaway VSATs ( very small aperture terminals) Norsat offers unique features/benefits to this market including: Small size simplifies integration and saves space on platform or in transit case Low weight means lower vehicle payload weight or lower portable VSAT transport weight Low power consumption means lower platform power demand and/or increased battery life Low heat dissipation simplifies platform/radome cooling and improves reliability in high temperature environments BUCs and SSPAs for remote sensing radar, ground weather radar, search and rescue, UAV weather radar Norsat offers unique features/benefits to this market including: Fast Switching provide huge power savings for lowduty cycle pulsed radar systems High Reliability offer more than 2-times the operating life of current technology Low Voltage low voltage power supply is safer, simpler to operate, and more reliable current technology Copyright 2014 Norsat International Inc. 24

25 Growth Opportunities: LMR Product Ceramic Combiners State of the art, lightweight Ceramic Combiner used in antenna base stations worldwide for a wide range of applications Key features and competitive edge: Expandability enables the customer to purchase in singlechannel increments and bolster their networks as demand arises. Small size, efficient use of rack space customers can expand their current systems without increasing their tower loads by simply adding more radio room equipment Low Insertion Loss designed to allow a number of transmitters to share a single antenna Revenue potential for Ceramic Filter estimated to be $15M Copyright 2014 Norsat International Inc. 25

26 Growth Opportunities: LMR markets Public Safety Used for police, fire, ambulance and emergency response Transportation Positive Train Control (PTC), Maritime for ship to shore communications, and air traffic control. Utilities Products for voice & data systems to facilitate monitoring and maintenance of transmission infrastructure Resources Products used in voice and data for exploration and operations. Copyright 2014 Norsat International Inc. 26

27 Industry Leader in Niche Market Segment Compelling Market Trends To Expand Communications Footprint Integrated Product Offerings to Meet the Unique Needs of Customers Strong International Presence with Elite Customer Base New Product Opportunities Providing Added Growth Proven Track Record of Successful Acquisition Integration Strong Cash Flows and Effective Cost Controls Copyright 2014 Norsat International Inc. 27

28 Completed Acquisitions Norsat has successfully completed two acquisitions within the last three years, which have been quickly integrated and were immediately accretive to shareholders. Sinclair Technologies Acquired January 2011 Ontario-based Land Mobile Radio company Purchase price: $18.5M Acquired for product offerings, new and diverse customers, deep company history and strong reputation in industry Cornerstone acquisition, stabilized revenue base CVG Acquired April 2013 US-based satellite communications company Purchase price: $0.5M Acquired for IP to advance new products Shipped in excess $3.0 million of new product as a result of integration within first year Copyright 2014 Norsat International Inc. 28

29 Acquisition Loan & Equity Per Share $30 $0.60 $25 $0.50 $20 $0.40 $US Millions $15 $10 * $0.30 $0.20 $ Per Share $5 $0.10 $0 Dec'10 Jun'11 Dec '11 Jun '12 Dec '12 Jun'13 Dec'13 Jun'14 $0.00 Net working capital, excluding the acquisition loan Acquisition loan and promissory note Equity per Share *Acquisition loan and promissory note from acquisition of Sinclair was $12.75M in Jan Copyright 2014 Norsat International Inc. 29

30 Acquisition Targets Constantly evaluating potential candidates that are leaders in their field and meet core acquisition criteria of: Advance our core business communications for remote and challenging applications. Gain product or market extensions Niches that value good quality products that can be configured for specific applications with a fast delivery time Synergies Strong IP base and R&D Focus Product or market extensions Advance core business Accretive Potential target Copyright 2014 Norsat International Inc. 30

31 Industry Leader in Niche Market Segment Compelling Market Trends To Expand Communications Footprint Integrated Product Offerings to Meet the Unique Needs of Customers Strong International Presence with Elite Customer Base New Product Opportunities Providing Added Growth Proven Track Record of Successful Acquisition Integration Strong Cash Flows and Effective Cost Controls Copyright 2014 Norsat International Inc. 31

32 Revenue, Adjusted EBITDA, Adjusted EBITDA Per Share $45.0 $40.0 AEPS: $0.08 $42.4 AEPS: $0.07 AEPS: $0.09 AEPS: $0.11 $37.8 $38.2 $36.4 $35.0 $US Millions $30.0 $25.0 $20.0 AEPS: $0.05 $20.2 $15.0 $10.0 $5.0 $0.0 $4.2 $2.8 13%* 11%* 11%* $6.4 $4.8 $5.1 14%* 17%* TTM June 2013 Revenue Adjusted EBITDA * EBITDA Margin * AEPS= Adjusted EBITDA Per Share Copyright 2014 Norsat International Inc. 32

33 Statistics & Balance Sheet Ticker TSX: NII, OTCBB: NSATF Common shares outstanding 58.3 million Market Float 95% Market Cap CA$30M* Stock Price CA$0.52* 52-Week Range 52-week range: CA$ CA$0.61* Number of Employees 165 Cash Acquisition Loan: Line of Credit: Net Working Capital: $3.2M** $3.4M** remaining, quarterly payments of $0.5M $4.2M** available $16.3M** (excluding acquisition loan) *As of August 7, 2014 **As of June 30, 2014 Copyright 2014 Norsat International Inc. 33

34 Outlook Near-Term Longer-Term Copyright 2014 Norsat International Inc. 34

35 Near-Term Outlook Satellite Communications division, is expected to have revenue improvements driven by the ATOM Series of Ku-Band BUCs and SSPAs. Land Mobile Radio segment has shown consistent revenues in the first half of 2014, the infrastructure and public safety markets have shown signs of recent softness that is expected to rebound in Financial strength to pursue additional merger and acquisition opportunities Copyright 2014 Norsat International Inc. 35

36 Longer-Term Strategy Broaden product and services portfolio Diversify into new market verticals such as: commercial, resource, transportation and public safety sectors Continue to focus on R&D Add recurring revenue streams Pursue merger and acquisition opportunities Maintain profitable growth $ M 10-15% Revenue EBITDA Margin Copyright 2014 Norsat International Inc. 36

37 Thank You Contact information: Dr. Amiee Chan Arthur Chin President & CEO Chief Financial Officer Tel: Tel: Robert Blum, Adam Lowensteiner and Joe Diaz Lytham Partners, LLC (Phoenix) (New York) Copyright 2014 Norsat International Inc. 37