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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 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.
2
KEY FACTS
Company: API Technologies Corp.
Exchange/Ticker: NASDAQ: ATNY
Share Price (11/30/12): $2.63
52-Week High / Low: $2.31 / $4.10
Shares O/S Basic/Diluted: 54.8 million / 58.7 million
Market Cap: $144 millionMarket Cap: $144 million
Enterprise Value: $330 million
LTM Revenue (1)(3): $293.1 million
LTM EBITDA(1)(2)(3): $42.8 million
LTM CAPEX(1)(4): $1.6 million
(1) LTM period ending August 31, 2012
(2) $34.1M in cost savings implemented and being realized since Feb. 2011
(3) Includes CMT acquisition, C-MAC, and RTI
(4) Does not include CMT, C-MAC, and RTI
3
Note: Company’s fiscal year end is 11/30/12
• 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
– Demonstrated ability to generate cash
4
• 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
5
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
6
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
OUR MARKETS & CUSTOMERS
DefenseDefense
48%
• Radar
• Military aircraft
Missile defense
Medical, Industrial & Medical, Industrial &
Commercial AerospaceCommercial Aerospace
17%
• Medical devices
• Commercial air
• Alt. Energy
Commercial & Commercial &
CommunicationsCommunications
23%
• Satellites
• Internet
IT Systems
Government & Government &
SecuritySecurity
12%
• Secure
communications
Secure access
7
LTM Ended August 31, 2012
• Missile defense
• SATCOM
• C4ISR
• UAVs
• Alt. Energy
• Downhole
• Transportation
• IT Systems
• Mobile devices
• Secure access
• Encryption
RF/Microwave & Microelectronics
32.6%
Electromagnetic Integrated Solutions (EIS)
18.1% 9.0%
Sensors Products
ATTRACTIVE PRODUCT PORTFOLIO
8
Power Solutions
5.9%
Secure Systems &Information Assurance (SSIA)
8.7%
Electronics Manufacturing Services (EMS)
25.7%
LTM-Ended August 31, 2012
• Mission critical technology that safeguards the world’s most highly sensitive environments
• Focus on addressing critical cyber security requirements and emerging mobility needs
• Innovative technology, multiple patents
• End markets
SECURE SYSTEMS & INFORMATION ASSURANCE
OFFERING OVERVIEW
• End markets– 80% Government & Military / 20% Commercial
• Featured customers– Governments of UK, Canada, United States
– U.S. Department of Defense
– NATO Countries
– Fortune 500 Firms
9
SSIA PRODUCTS
Secure Communication Secure Networking Encryption
•One of the world’s largest developers of TEMPEST & Emanation Security Solutions
•First business in the UK to be
•Products enable privileged users to access sensitive data and critical systems easily, dynamically, and securely
•Products enable privileged users to interoperate securely across organizational boundaries and untrusted systems
10
•First business in the UK to be accredited under the CESG Formal TEMPEST Certification Scheme (CFTCS)
•Designed to process highly sensitive, classified government information
•Marketed under the names SST™ (Europe & NATO) & EMCON® (US and Canada)
securely
•Award-winning products used by both Fortune 500 firms and the U.S. Department of Defense
untrusted systems
•Focused on the creation of dynamic Communities of Interest (COI)
•Also offer fully encrypted line of mobile communication products
Netgard™
Encryption Suite
Secure
Communications Hub
ION™ SA500
Service Access
Point
Secure
USB Hub
WELL POSITIONED SUPPLIER AT
EVERY STAGE OF VALUE CHAIN
En
gin
ee
rin
g
MODULES & IMAS
SUBSYSTEMS
SYSTEMS
Compelling 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
11
ELECTRONICS MANUFACTURING SERVICES: Engineered Build-
to-Print, Cable & Harness, SMT, Mixed Technologies, Box Builds EM
SD
esi
gn
COMPONENTS: Passives & Actives
HYBRIDS
SINGLE-FUNCTION ASSEMBLIES
MULTI-FUNCTION ASSEMBLIESfor customers looking to
streamline supplier base
ATTRACTIVE INDUSTRY DYNAMICS
• Defense electronics are growing at an
annual rate of 3% even with reduced
defense budgets(1)
• Total defense outlays for fiscal 2Q12
grew 5.4%, the highest since fiscal 1Q11
• Investment account spending(2)
(procurement + R&D, test & evaluation)
grew 9.5% year over year(2)
• Cyber security, information assurance, and
(2)
12
• Cyber security, information assurance, and
secured systems are cornerstone of
current and future defense and homeland
security platforms
• Non-defense niche applications aligned
with growth markets (medical, alternative
energy, oil and gas, mobile
communications)
(1) The Teal Group
(2) US Treasury Data/KeyBanc Research
• Technology alignment with funded and growth areas of
Defense budget
• Changes in Department of Defense creates opportunities
– Partner with Primes as they consolidate their supply chain
– API is well-positioned as a substantial one-stop-shop
(from components, to subsystems, to Systems)
– Upgrade vs. buy new: Positioned well for defense
STRONG MARKET OUTLOOK FOR API
– Upgrade vs. buy new: Positioned well for defense
refurbishment projects; incumbent supplier with over 40
years of strong successful heritage
• US foreign military sales continues growth with excellent
opportunities for API
• Growth in space end market (4% of total sales and growing)
Large and growing Total Available Market (TAM) & Serviceable
Available Market (SAM) in non-DoD markets offers
diversification
13
DIVERSE AND ATTRACTIVE
PROGRAM EXPOSURE• Well balanced: Top DoD/government programs account for
40% of revenue
• LTM revenue for top revenue program 3% of total sales
• Program alignment with DoD funding
• Program concentration in targeted technology areas
Top Programs
Secure CommunicationSecure Communication8.2 %
7.2 %
5.9 %
Military AircraftMilitary Aircraft
C4ISRC4ISR
LTM-Ended August 31, 2012
14
Other60%
Top Programs40%
5.9 %
5.5 %
5.1%
4.2 %
3.9%
Missile ProgramsMissile Programs
Jamming/AntiJamming/Anti--JammingJamming
C4ISRC4ISR
Radar ProgramsRadar Programs
Electronic WarfareElectronic Warfare
API’S PRODUCTS ON KEY DOD/GOVERNMENT
PLATFORMS & PROGRAMS
Secure Communication
7.2%
Missile Programs
5.5%
Military Aircraft
8.2%
Jamming/Anti-Jamming
3.9%
C4ISR
5.9%
RadarPrograms
5.1%
ElectronicWarfare
4.2%
15
7.2%
Secure communication solutions used by U.S. Government entities and NATO countries
• TEMPEST& Emanation Security
• Rugged/Mobile CommunicationsPlatforms
• Secure Networking• Encryption
LTM-Ended August 31, 2012
5.5%• Standard Missile• Patriot• AEGIS• AMRAAM• APR-39• HTS/HARM• JDAM• LRAS• Maverick• Meads• MK-73• Hellfire• THAAD
8.2%
• Eurofighter Typhoon• Chinook• Seahawk• Shadow• Black Hawk• Osprey• Harrier II• Apache Longbow• F-16 Eagle• F-18 Fighting Falcon• F-22 Raptor• F-35 JSF• Peace Pioneer
3.9%Programs aimed at detecting and distrupting explosive devices
5.9%
• ID Friend or Foe• Falcon• JTIDS• JPALS• JTRS• NMT• WIN-T• Skyfire• VSAT• WAVPAC/Manpack
5.1%• ALR56• ALR95• ASQ-81• Blighter• CEC• EOTS• GATOR• LAMPS• LCMR• PRSS• MAWS• RFIS• SIRFC• TRIMM
4.2%• AIDWS• DEWS• MALD• Q-126• Sahara Program• SPEWS• SEWIP• Symphony• MK-53
FEATURED PRODUCTS
400Hz UAV PDU
AESA RadarModulesMicrowave
modules for use in next-
EIS
16
ION™ SA5600Secure ApplianceUsed by Verizon Business™ and Avaya® Fortune 500 companies to provide third-party access to critical information systems
SST™ Liaison SuiteInconspicuous and highly portable secure communications kit
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
GaNPower AmpsUltra broadband power amplifiers
For use in Electronic Warfare, Radar & C4ISR applications
modules for use in next-generation Radar systems
PassiveFilters
Band reject filter eliminates television and wireless signal interference
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
Leading Financial Institution
17
LTM-Ended August 31, 2012
• Won several, major long-term program wins:– $3.6M AESA Radar Module opportunity with major European missile defense
program
– $1.7M High Power/Small Signal amplifier opportunity
• $20 million contract lifespan potential
– Complex multi-function communications link for European defense opportunity
• $90 million contract lifespan potential
• Achieving EMS business turnaround: Stabilized EMS segment
Q3 BUSINESS HIGHLIGHTS
• Achieving EMS business turnaround: Stabilized EMS segment EBITDA and grew bookings (1.2 Book-to-Bill)
• Implemented additional $5.5M in annualized cost reductions
• 174 new design wins and introduced 8 major, new product families
• Sales funnel at over 205 million dollars at the end of August quarter
18
$6.2 million order for
Electronic Warfare
(EW) integrated
assemblies for use in
major DoD platform
OTHER RECENT WINS
$1.7 million order
for High Power Small
Signal amplifiers for
use in DoD platform
$2.4 million order for
19
$1.9 million add-on order
for EMI filtering solutions
for major weapons
program; brings fiscal year
program total to
over $5 million
$2.4 million order for
critical Circuit Card
Assemblies for use in
Department of Defense
Electronic Warfare
program
OUR FOOTPRINT• 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• AS9100 Rev C
• ISO 9001:2008 (All manufacturing facilities)
• International manufacturing locations are API companies and not subcontractors; same equipment and processes as U.S. facilities
20
Manufacturing & Design
Design
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
21
Ending Quarter
includes CMT
• May 2012 Ending
Quarter includes
RTIE and C-MAC
• August 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
• SSIA August
2011 ending
quarter lower
22
quarter lower
revenue due
to customer
demand pull in
May 2012
ending quarter
• SSC average
revenue for
the past 3
quarters is
about $51mm
QUARTERLY ADJ. EBITDA IN $MM AND % OF REVENUE
Key Points
• Aug Ending Quarter 2012:• SSC Adj EBITDA
was $8.7 MM and 17.1% as a percentage of revenue
• SSIA Adj EBITDA was $0.6MM and 13.8% as a percentage of
8.1
11.5 10.8 11.2 9.3
7.0%
12.0%
17.0%
22.0%
4.3
6.3
8.3
10.3
12.3 Adj. EBITDA Adj. EBITDA %
23
percentage of revenue
• EMS Adj EBITDA
was $0MM and 0%
as a percentage of
revenue
• Overall EBITDA %
Goal: 20%
• EMS EBITDA % Goal:
10%
(3.4)
8.1 9.3
-13.0%
-8.0%
-3.0%
2.0%
(3.7)
(1.7)
0.3
2.3
4.3
May-11 Aug-11 Nov-11 Feb-12 May-12 Aug-12
BALANCE SHEET(1)
Assets (in $ millions)
Cash & cash equivalents $16.5
Accounts receivable $48.6
Inventory $67.0
Other $2.6
Liabilities & Shareholders’ Equity (in $ millions)
Accounts payable & accrued expenses $32.2
Current debt $2.5
Other $0.6
Total Current $134.7
Fixed assets $45.1
Goodwill, intangibles & other $219.9
Total $399.7
Total Current $35.3
Long-term debt & other $184.4
Deferred taxes $3.9
Total Liabilities $223.6
Total Shareholders’ Equity and other $176.1
Total $399.7
(1) As of Aug 31, 2012
24
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 &
BRIAN KAHN, Chairman of the Board
• Managing Member and Founder of Vintage Capital Management
• Invested in several public and private defense companies, including White Electronics Designs
Corp, Integral Systems, and others
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 sector
25
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
– Demonstrated ability to generate cash
26