Slide 1: Investor Presentation
Investor Presentation This presentation contains information as of January 28, 2016 . See disclosures on page 1.
Slide 2: Cautionary Statement Regarding Forward-Looking Statements
1 Cautionary Statement Regarding Forward - Looking Statements Certain information in this presentation contains forward - looking statements, including but not limited to, information relating to Comtech Telecommunications Corp . ’s (“Comtech” or the “Company ”) f uture performance and financial con
Slide 3: Today's Presenters
Today’s Presenters 2 Dr. Stan Sloane, CEO & President • CEO & President since January 2015 and has served as a director of Comtech since January 2012 • Previously served as President and CEO and a member of the Board of Directors of Decision Sciences International Corporation • Prior to Decision Sci
Slide 4: 2015: A Year of Transformation for Comtech
2015: A Year of Transformation for Comtech 3 April 2015 Comtech Awarded $20 million U.S. Army contract January 2015 Comtech names Dr. Stanton D. Sloane CEO and President (1) August 2014 Comtech explores broad r ange of strategic alternatives July 2015 Comtech announces organizational changes (subsid
Slide 5: Agenda
Agenda 4 Company Overview Investment Highlights Financial Overview
Slide 6: Company & Business Overview
= OMTECH PTS Company & Business Overview
Slide 7: Overview of the New Comtech
Commercial Solutions Approximately 50 % of Revenues • SCPC Modems & SSPA A mplifiers • TWTA High Power Amplifiers • 911 S olutions • Next Generation 911 Systems • Location - based Services • Mobile Applications • Mobility Solutions Government Solutions Approximately 50% of Revenues • Command & Contr
Slide 8: Strategic Rationale for TCS Acquisition
6 + Provides Entry Into Growing Commercial Markets • Expands Comtech into public safety markets which are adopting Next Generation 911 solutions • Expands Comtech into the mobile application market which has a need for Trusted Location solutions • Brings new relationships with large U.S . domestic c
Slide 9: Increased Scale & Diversified Earnings
Commercial 56% Government 44% Domestic 68% International 32% 7 (1) Represents TCS’s financials for the four fiscal quarters ended September 30, 2015. (2) Based on Comtech’s fiscal year ended July 31, 2015 and TCS’s fiscal year ended December 31, 2014. (3) For purposes of this presentation, Comtech’s
Slide 10: Our Combined Organization
Government Solutions Segment C4ISR • Tactical communications, managed networks, logistics, end - to - end integration Cyber Intelligence Solutions • Cyber security training • Computer network operations Mobile Data Communications • Secure, satellite - based mobile communications and tracking systems
Slide 11: Growth Drivers
Growth Drivers 9 • Compete for a larger number of government contracts as a result of TCS’s significant technology resources and prime contracting experience, together with increased scale and key past performance qualifications of the combined business • Cross - sell current international carrier c
Slide 12: Investment Highlights
= OMTECH PELL Investment Highlights
Slide 13: The New Comtech – On Path to Drive Growth
The New Comtech – On Path to Drive Growth Deep Bench of Highly Experienced Managers Track Record of Returning Capital to Shareholders Diverse Customer Base That Can Be Further Penetrated and Expanded Industry Leading Innovation Market Leader Exposure to Large, Growing End Markets 10 2 1 3 4 5 6
Slide 14: Exposure to Large Growing End Markets
(1) Satellite Industry Association, State of the Satellite Industry Report, 2015. (2) Northern Sky Research, Wireless Backhau l, Trunking and Video Offload via Satellite, 8 th Ed., 2014. (3 ) Research and Markets, The Global C4ISR Market 2014 - 2024 - Market Size and Drivers: Market Profile, 2015. (
Slide 15: Satellite-based Communications
Growing need for satellite - based communications. Satellite - based Communications REPRESENTATIVE PRODUCTS WIRELESS BACKHAUL NEW HTS SATELLITES & UPGRADES HD & ULTRA HD BROADCASTING IN - FLIGHT CONNECTIVITY SCPC Modems TWTA Amplifiers • Carriers extending networks into remote regions where wireless
Slide 16: New HTS Satellites & Upgrades
13 New HTS Satellites & Upgrades Source: Company websites. Closed Systems Open Systems Given our expertise, some of our TWTA amplifiers and SCPC modems have been designed into the following closed systems: All of our satellite earth station equipment (such as our SCPC modems, SSPA and TWTA amplifier
Slide 17: Command & Control (C4ISR) Solutions
Command & Control (C4ISR) Solutions REPRESENTATIVE PRODUCTS SECURE DEFENSE COMMUNICATIONS C4ISR SYSTEMS INTEGRATION CYBER - SECURITY ELECTRONIC WARFARE Troposcatter • We provide the U.S. military with the solutions necessary to transmit digital voice and data securely • Our military tactical transmi
Slide 18: Enterprise & Location-based Services
(1) ABI Research, Location Technologies, 2013. Enterprise & Location - based Services REPRESENTATIVE PRODUCTS TELEHEALTH MAPPING & NAVIGATION PRECISE TRUSTED LOCATION FUTURE APPLICATIONS Trusted Location • The VirtuMedix platform provides immediate virtual health services to patients and helps stake
Slide 19: Public Safety & Next Generation 911
Public Safety & Next Generation 9 - 1 - 1 REPRESENTATIVE PRODUCTS INSTALLED E9 - 1 - 1 MARKET NEXT GENERATION REFRESH INTERNATIONAL MARKETS LocatE9 - 1 - 1 • TCS’s wireline E9 - 1 - 1 and wireless VoIP solutions serve over 140 million wireless and IP - enabled devices • TCS supports half of all U.S.
Slide 20: Market Leader
Market Leader 17 Leading provider of over - the - horizon microwave (or “troposcatter”) products and systems Offering the only available adaptive troposcatter modem operating at 50 megabits per second ("Mbps ") One of the largest independent suppliers of broadband, high - power, high - performance R
Slide 21: Industry Leading Innovation
Support • Provides continuity capability planning (COOP), information services, cyber security and integrated logistics support • Other offerings include acquisition support, in - building wireless services, managed network services and professional & technical services In - Flight SSPAs • New, more
Slide 22: Diverse Customer Base That Can Be Further Penetrated and Expanded
• ARMY GTACS: $10.0 billion PRIME • DISA CS2: $2.6 billion PRIME Diverse Customer Base That Can Be Further Penetrated and Expanded 19 4 TCS’s Strategic Contract Vehicles Comtech’s Government Relationships TCS’s Government Relationships Comtech’s Commercial Relationships TCS’s Commercial Relationship
Slide 23: Track Record of Returning Capital to Shareholders
20 5 Note: Comtech fiscal year ending July 31 . (1) Based on declaration date. Dividends Per Share (1) $1.00 $1.10 $1.10 $1.18 $1.20 0.90 0.95 1.00 1.05 1.10 1.15 1.20 $1.25 2011A 2012A 2013A 2014A 2015A We have paid over $109.4 million in quarterly dividends over the past 21 quarters. Fiscal 2016 T
Slide 24: Deep Bench of Highly Experienced Managers
Tenure with Company / in Industry Bio Lynne Houserman 12 / 21 Senior Vice President and General Manager, Safety and Security Group. Provides leadership and guidance for Public Safety Solutions. Previously worked at Vonage, AT&T Wireless and Metrocall. Jay F. Whitehurst 5 / 30 Senior Vice President a
Slide 25: Investment Highlights
Investment Highlights 22 1 2 3 4 5 Deep Bench of Highly Experienced Managers 6 · CEO and CFO both have experience executing M&A · Deep bench of managers – Key executives have decades of industry experience · Existing TCS executive product line managers are expected to continue to run their respectiv
Slide 26: Financial Overview and Integration Plan
Financial Overview and Integration Plan
Slide 27: Historical and Combined Performance
$780 $693 $666 $104 $98 $87 2013 2014 2015 16.3% 17.7% 16.8% Historical and Combined Performance 23 Comtech Revenue and Adj. EBITDA, 2013 – 2015 (1) ($ in millions) Adj. EBITDA Margin % Comtech + TCS Revenue and Adj. EBITDA, 2013 – 2015 (3) ($ in millions) $320 $347 $307 $52 $61 $52 2013 2014 2015 T
Slide 28: Business, Market & Financing Update
Business, Market & Financing Update 24 Both companies remain f ocused on business & integration Continued to be impacted by challenging market conditions Committed f acility terms almost finalized – blended interest rate now in 4% to 6% range Transaction still expected to close by March 22, 2016; sh
Slide 29: Things to Think About in the New Comtech Financial Model
· TCS and Comtech have approximately $6.4 million of “intercompany” revenue · Initial estimate of $160.9 million of intangibles amortized for 10 years (1) – Detailed analysis currently being performed – Deferred revenue required to be fair valued · Remaining “excess” purchase price of $220.4 million
Slide 30: Integration Plan Remains On Track
Integration Plan Remains On Track 26 November 2015 Comtech Announces Telecommunication Systems (“TCS”) Acquisition for $431 Million Closing Focused attention to make TCS business u nits more a ccountable strategically & financially. US payroll & HR system Common benefit plans Elimination of duplicat
Slide 31: Appendix
= OMTECH PELL Appendix
Slide 32: Reconciliation to GAAP
27 Reconciliation to GAAP TCS CMTL Excluding Synergies Four Fiscal Quarters Ended September 30, 2015 Four Fiscal Quarters Ended July 31, 2015 Pro Forma Combined (2) Reconciliation of GAAP Net Income to Adjusted EBITDA (1) GAAP Net Income $3,688 $23,245 $26,933 Interest, Net 8,123 74 8,197 Depreciati
Slide 33: Reconciliation to GAAP (cont'd)
(in '000s) FY FY FY FY FY 31-Jul-11 31-Jul-12 31-Jul-13 31-Jul-14 31-Jul-15 Reconciliation of GAAP Net Income to Adjusted EBITDA (1) GAAP net income $67,895 $32,416 $17,808 $25,151 $23,245 Net interest (income) expense 5,994 7,237 6,996 5,391 74 Depreciation and amortization 22,344 16,162 14,165 13,
Slide 34: Reconciliation to GAAP (cont'd) – TeleCommunication Systems
(in '000s) LTM LTM LTM LTM LTM 30-Jun-11 30-Jun-12 30-Jun-13 30-Jun-14 30-Jun-15 Net income $11,896 ($108,604) $10,798 ($55,316) ($1,300) Tax provision (loss) 8,740 (13,824) (3,073) 19,632 4,703 Interest and other income, net 8,758 7,714 9,905 10,757 9,589 Income (loss) from operations 29,394 (114,7