101 slides from Comtech Telecommunications's proxy contest presentation, Nov 22, 2021
Slide 1: The Case for Change at Comtech
THE CASE FOR CHANGE AT After decades of underperformance at Comtech, Outerbridge is committed to restoring value to shareholders https://www.RestoreComtech.com
Slide 2: Legal Disclaimer
Legal Disclaimer THE MATERIALS CONTAINED HEREIN (THE “MATERIALS”) REPRESENT THE OPINIONS OF OUTERBRIDGE PARTNERS, LP AND THE OTHER PARTICIPANTS NAMED IN THIS PROXY SOLICITATION (COLLECTIVELY, “OUTERBRIDGE”) AND ARE BASED ON PUBLICLY AVAILABLE INFORMATION WITH RESPECT TO COMTECH TELECOMMUNICATIONS CO
Slide 3: Table of Contents
Table of Contents Executive Summary 10 Prolonged Underperformance 39 Poor Capital Allocation 52 Comtech is Undervalued 59 Dilutive PIPE Transaction 63 Egregious Governance 73 Conclusion 85 Appendix 87 3
Slide 4: About Comtech Telecommunications Corp. (NASDAQ: CMTL)
About Comtech Telecommunications Corp. (NASDAQ: CMTL) Revenue Adj. EBITDA ➢ Comtech is a provider of specialized communications technologies to customers in the commercial satellite, Government government, and public safety industries Government 20% 38% ➢ Founded in 1967, Comtech has for decades bee
Slide 5: About Outerbridge Capital Management, LLC
About Outerbridge Capital Management, LLC ➢ Outerbridge Capital Management, LLC ("Outerbridge") is a New York-based BNED Share Price is up 380% since Outerbridge's investment adviser that typically invests across the technology and Cooperation Agreement technology-impacted sectors. 14.0 07/21/2020 ➢
Slide 6: Timeline of Initial Engagement with Comtech
Timeline of Initial Engagement with Comtech (Pre-Nomination Letter) July 22nd CMTL issued a press release announcing Judy Chambers' June 8th – June 9th Board appointment, the plan to reduce the Board to five November 2020 Outerbridge contacted CMTL to members in December & appointment of Lawrence Wa
Slide 7: The Evaluation of Outerbridge Nominees Was Disingenuous From The Start
The "Evaluation" of Outerbridge Nominees Was Disingenuous From The Start The Nomination Process Involved in the Retiring Board ➢ None of the retiring members of the Nominating and Governance Tenure Committee/Role Nominee Interview Members Committee intervened to lead the process to ensure that Proce
Slide 8: Wendi B. Carpenter (Rear Admiral, U.S. Navy, Retired)
Wendi B. Carpenter (Rear Admiral, U.S. Navy, Retired) ➢ Principal and Founder of Gold Star Strategies LLC (2012 to Present) ➢ President of the State University of New York Maritime College (2011 to 2013) ➢ State of New York Special Envoy for Maritime Matters (2011 to 2014) ➢ Distinguished 34-year ca
Slide 9: Sidney E. Fuchs
Sidney E. Fuchs E. Fuchs ➢ Chairman of the Board at Eutelsat America Corporation, a subsidiary of Eutelsat SA (NTSE Euronext: ETL FP) (2021 to Present) ➢ Strategic Advisor to the CEO for Belcan Engineering, LLC (2020 to Present) ➢ Board of Directors of NT Concepts (2020 to Present) ➢ Board of Direct
Slide 10: Executive Summary
EXECUTIVE SUMMARY Outerbridge
Slide 11: Why Change is Warranted
Why Change is Warranted A Track Record of Poor Corporate Comtech’s Persistent Underperformance, A Long History of Poor Capital Allocation Governance and Lack of True Strategic Failures, and Lost Credibility and Failed M&A Independence on the Board ➢ Comtech’s Total Shareholder Return ➢ Since 2016, M
Slide 12: Why Change is Warranted (cont.)
Why Change is Warranted (cont.) A Disappointing Pattern of Dismissive A Board Underqualified to Guide Comtech or Outerbridge Nominees Represent the Best Engagement and Entrenchment Evaluate Strategic Offers Choice for Shareholders Maneuvers ➢ CEO succession plan promoted 20-year ➢ The Board has been
Slide 13: Comtech Has Consistently Underperformed Its Peers And Benchmark Indices
Comtech Has Consistently Underperformed Its Peers And Benchmark Indices 1-YEAR TSR 3-YEAR TSR 58% 57% 61% 47% 32% 44% 31% (28%) Peer Median CMTL S&P500 Nasdaq Telecom Peer Median CMTL S&P500 Nasdaq Telecom Index Index 5-YEAR TSR 10-YEAR TSR 304% 195% 170% 152% 123% 100% 24% 28% Peer Median CMTL S&P5
Slide 14: Comtech Has Failed to Develop and Execute a Growth Strategy
Comtech Has Failed to Develop and Execute a Growth Strategy Revenue and Adj. EBITDA have improved marginally since FY17, and declined after peaking in FY19 Revenue Commercial Government $671.8 $616.7 $550.4 $570.6 $581.7 $314.5 $225.5 $263.0 $221.5 $219.5 $330.9 $345.1 $357.3 $353.7 $360.1 FY17 FY18
Slide 15: Government Solutions Segment Plummeted a Decade Ago and Has Never Recovered
Government Solutions Segment Plummeted a Decade Ago and Has Never Recovered US$MN Government Solutions Revenue $600.0 $553.3 $500.0 CMTL discloses that CEO Fred Kornberg $400.0 $378.0 Has Lost His Security CMTL acquired more Clearance than $100M of govt. revenues through the $314.5 $300.0 TCS acquis
Slide 16: Comtech Shareholders Did Not Benefit from the Flawed TCS Acquisition
Comtech Shareholders Did Not Benefit from the Flawed TCS Acquisition Pro Forma TCS/CMTL at Announcement vs FY2017 Actual CMTL reported net leverage of 3.85x at close and net leverage of 3.00x within 12 months LTM Revenue Adj. EBITDA Adj. EBITDA Margin CMTL $307.3M $51.8M 16.9% Both TCS and CMTL Reve
Slide 17: TCS Acquisition Was Followed by a Below-Market Secondary Offering
TCS Acquisition Was Followed by a Below-Market Secondary Offering Resulting in Tremendous Shareholder Value Destruction Nov. 2015: TCS Acquisition Announced CMTL Share Price Performance $30.00 11/23/2015: Share price fell 5.5% upon Feb. 2016: TCS Acquisition Closed announcement of TCS acquisition $2
Slide 18: Lack of Confidence in Board's Ability to Execute the Gilat Acquisition
Investors’ Lack of Confidence in the Board's Ability to Execute the Gilat Acquisition Resulted in a 19% Drop in Share Price Upon Announcement Similar to the TCS transaction, net leverage was expected After a failed TCS deal that required a dilutive secondary to be 3.85x upon closing offering, once a
Slide 19: $950M in Spending Since FY2016 Has Resulted in $700M Of Shareholder Value Destruction
$950M in Spending Since FY2016 Has Resulted in $700M Of Shareholder Value Destruction Acquisitions Completion Purchase Price (M) UHP Networks Inc. 3/2/2021 $38 +350 1270 -704 NG 911, Inc. 2/21/2020 $1 +599 Gilat Satellite Not $70M Termination Fee Networks Ltd. Completed CGC Technology 1/27/2020 $24
Slide 20: Management Guidance Is Highly Suspect
Management Guidance Is Highly Suspect CMTL wants shareholders to believe that the declining trend in revenue and Adj. EBITDA will suddenly reverse in Q4FY22, while pursuing the same failed strategy FY22 Guidance Suggests: ➢ 15% yoy decline in revenue in Q1FY22 ➢ 79% yoy decline in Adj. EBITDA in Q1F
Slide 21: Negative Share Price Reaction to Key Announcements
Comtech’s Lack of Credibility is Reflected in Negative Share Price Reaction to Key Announcements Pricing of TCS $100M PIPE related secondary investment by TCS related offering at Michael Porcelain White Hat and TCS acquisition secondary offering $14/share Gilat acquisition CEO appointment Magnetar C
Slide 22: Consecutive Quarters Of Negative Market Reactions To Earnings Announcements
Comtech Has Lost Investor Confidence as Evidenced by 8 Consecutive Quarters Of Negative Market Reactions To Earnings Announcements 1-day price impact to quarterly earnings announcement (%) Q4 FY21 Investor Presentation ➢ “Financial performance is expected to -0.4 be significantly lower in the first
Slide 23: Comtech's Three Key Businesses Trade At Significantly Different Valuation Multiples
Comtech’s Three Key Businesses Trade At Significantly Different Valuation Multiples Ticker Company Name EV/2022 EBITDA Satellite GILT Gilat Satellite Networks Ltd. 8.8x TDY Teledyne Technologies Incorporated 19.5x VSAT ViaSat, Inc. 8.5x Median 8.8x Gov't/Defense KTOS Kratos Defense & Security Soluti
Slide 24: Investments in NG911 Have Not Translated Into Higher Valuation
Investments in NG911 Have Not Translated Into Higher Valuation Due to Comtech’s Failure to Disclose Public Safety Metrics Why hasn’t Comtech provided detailed If it were valued at peer multiples, Comtech’s 911 Business, which we believe represents around 30% of the Company’s information to allow the
Slide 25: Dilutive Vote-Buying Scheme Disguised as a PIPE
The Board's Entrenchment Efforts Culminated with a Dilutive Vote-Buying Scheme Disguised as a PIPE Transaction Summary Reason for Concern Questions Raised for Shareholders Magnetar Capital LLC and Investors White Hat Capital Partners LP Doubtful Use of Funds ➢ “Strategic” initiatives have already ➢
Slide 26: Comtech's Zero Premium PIPE is An Anomaly
Comtech’s Zero Premium PIPE is An Anomaly Compared to Deals In The Last 10 Years1 Conversion Price as a % Of Unaffected Trading Price 145.0% 142.2% How does the 138.5% Board explain accepting a near- zero premium – 130.0% one of the lowest in the last decade? 118.5% 116.7% 115.0% 112.4% 110.0% 100.9
Slide 27: Investors Questioned the Strategic Rationale of the PIPE Deal
Investors Questioned the Strategic Rationale of the PIPE Deal as Reflected by the 6.3% Decline in Share Value Upon Announcement Comtech's “Strategic” Rationale for PIPE: ➢ Completing the build out of the Company’s new technology centers and advanced manufacturing capabilities in Arizona and the Unit
Slide 28: Entrenchment Interests Ahead of Due Diligence
Comtech Appears to Have Placed Entrenchment Interests Ahead of Due Diligence The Board did Not Perform a Robust Market Check ➢ Outerbridge and other large shareholders were not contacted regarding participation in any additional share or rights offering ➢ Outerbridge knows first-hand that multiple p
Slide 29: The Board Undercut its Own Perceived Valuation of the Stock Price
The Board Undercut its Own Perceived Valuation of the Stock Price How exactly did the Board serve the interest of common “I think the one thing we all agree on is shareholders by agreeing to such an egregious financing that the stock is undervalued and should arrangement that features: be trading in
Slide 30: Flawed Board Refreshment Process
Comtech's Poor Performance is a Direct Result of a Flawed Board Refreshment Process that Has Failed to Add Directors with Relevant Industry and M&A Experience Year Added to Board Director Principal Occupation Primary Discipline Edwin Kantor Executive Director, S2K Financial LLC Finance 2001 Ira S. K
Slide 31: Board Refreshment Based on Personal Relationships
Board "Refreshment" Has Been Based on Personal Relationships Instead of Skills and Relevant Experience [Through Family Connections] Judy Chambers Lisa Lesavoy Michael D. Porcelain COO & CEO-Elect Fred Kornberg Dr. Yacov A. Shamash CEO/Chair Key: Referred by Fred Kornberg Referred by Director with Ex
Slide 32: The Recent Refreshment is Yet Another Entrenchment Effort
The Recent "Refreshment" is Yet Another Entrenchment Effort By the Board # of % Elected by Board Constitution Description Strategy Explained Directors Shareholders Classified Board structure minimizes risk 2020 Board +7 100% exposure to shareholder voting Director turnover Retiring Directors -3 jeop
Slide 33: A Board Severely Lacking In Industry Experience
Comtech's Vision: A Board Severely Lacking In Industry Experience Board Experience Prior Operational Industry Experience Tenure Elected by Core Current Board Members Market Gov. (years) Shareholders Public Public Safety Satellite Experience Cap Contracting Independent Directors Up for Election
Slide 34: Outerbridge Ran a Thorough Process to Identify Nominees
Outerbridge Ran a Thorough Process to Identify Nominees With the Experience, Skills and Expertise Needed to Enhance Shareholder Value Outerbridge Nominees CMTL Nominees Key Aspects of the Business ✓ Retained an independent director Wendi B. Carpenter Sidney E. Fuchs Judy Chambers Lawrence J. Waldman
Slide 35: Comtech Nominees Have Failed Shareholders: Judy Chambers
Comtech Nominees Have Failed Shareholders and Are the Wrong Choice Judy Chambers Poor Judgement Wrong Credentials Failed to recognize her conflict of interest and recuse No skills or expertise relevant to Comtech’s core herself in the "evaluation" of competing director business nominees No pri
Slide 36: Comtech Nominees Have Failed Shareholders (cont.)
Comtech Nominees Have Failed Shareholders and Are the Wrong Choice (cont.) Larry Waldman Poor Judgement Wrong Credentials Responsible for destroying $700M of shareholder Lacks operational and technical expertise to hold value through failed growth and M&A strategy Management accountable Failed
Slide 37: Steps Our Nominees Can Take to Unlock Shareholder Value
Steps Our Highly Qualified Nominees Can Take to Help Improve Performance and Unlock Shareholder Value 1. Conduct a full strategic review, including a potential sale of the Company or divestiture of assets or businesses ➢ Numerous loosely integrated subsidiary businesses may not belong with the corpo
Slide 38: Shareholders Must Act Now
Shareholders Must Act Now ➢ Comtech shareholders have suffered under the current Management team and a hand-picked Board with little to no relevant industry and public board experience ➢ Total Shareholder Return has lagged peer median and benchmark indices over 1-year, 3-year, 5-year and 10-year per
Slide 39: Prolonged Underperformance
PROLONGED UNDERPERFORMANCE
Slide 40: Key Takeaways: Financial and Share Price Underperformance
Key Takeaways: Financial and Share Price Underperformance Total Shareholder Return (TSR) has Consistently Lagged 1 Peer Median and Relevant Indices Failure to Develop and Execute a Credible Plan to Grow 2 Business, esp. in Government Solutions Segment FY22 Guidance is Highly Suspect and Implies Limi
Slide 41: Comtech Has Consistently Underperformed Its Peers And Benchmark Indices
Comtech Has Consistently Underperformed Its Peers And Benchmark Indices 1-YEAR TSR 3-YEAR TSR 58% 57% 61% 47% 32% 44% 31% (28%) Peer Median CMTL S&P500 Nasdaq Telecom Peer Median CMTL S&P500 Nasdaq Telecom Index Index 5-YEAR TSR 10-YEAR TSR 304% 195% 170% 152% 123% 100% 24% 28% Peer Median CMTL S&P5
Slide 42: Shareholders Suffered From Decision to Remain Independent After 2014 Strategic Review
Shareholders Suffered From the Board’s Decision to Remain Independent After Completion of a Strategic Review Process in 2014 300 CMTL Peer Median S&P 500 Nasdaq Telecom Index 250 167.8 200 150 134.5 100 50 94.6 0 -31.5 -50 -100 Source: FactSet, Data as of June 11, 2021, 1 business day prior to Outer
Slide 43: Failure To Achieve Consistent Growth Despite Shift In Strategy
Failure To Achieve Consistent Growth Despite Shift In Strategy and Acquisitions “The Company’s fiscal 2017 financial targets also reflect a tactical shift in strategy, particularly in the Government Solutions segment, as the Company intends to focus less on large commodity service contracts with mor
Slide 44: Significant Performance Gap Between CMTL's Two Business Segments
Significant Performance Gap Between CMTL's Two Business Segments Revenue Adj. EBITDA Margin Government Commercial Government 38% 19.7% Commercial 18.4% 18.6% 18.4% 17.4% 62% Adj. EBITDA 11.3% 9.8% 8.0% 7.7% 7.4% Government 20% FY17 FY18 FY19 FY20 FY21 Commercial 80% Source: FactSet, CMTL SEC Filings
Slide 45: Failure to Revive Government Solutions Segment
Failure to Revive Government Solutions Segment Recent 3-Year Performance (FY19-FY21) Management expects Government Solutions segment ➢ Revenue down 29.6% to further decline in FY22 ➢ Adjusted EBITDA down 54.3% ➢ “We expect Government Solutions segment net sales to be lower ➢ Net Income down 67.1% th
Slide 46: Disappointing Growth Prospects even Before the Impact of COVID
Disappointing Growth Prospects even Before the Impact of COVID Pro Forma TCS/CMTL at Announcement ➢ Pre-COVID, CMTL expected FY20 revenue of $712M; even if achieved, it would represent a meager 6% improvement from pro forma revenue at the time of the TCS acquisition LTM Revenue Adj. EBITDA Adj. EBIT
Slide 47: Disappointing Management Guidance For FY22
Disappointing Management Guidance For FY22 Pro Forma TCS/CMTL at Announcement LTM Revenue Adj. EBITDA Adj. EBITDA Margin CMTL $307.3M $51.8M 16.9% TCS $364.1M $40.4M 11.1% Pro Forma $671.4M $92.2M 13.7% FY22 Revenue ➢ Mid-point of FY22 revenue guidance is less than the pro forma revenue at the time
Slide 48: Supply Chain Blame vs Peers' Record Results
While Comtech is Blaming Supply Chain Issues for Disappointing FY22 Guidance, Its Peers Have Announced Record Results Peer Management Commentary Gilat Satellite “Our revenue this quarter showed significant year over year growth as we continue to increase profitability reaching an Networks 3QFY21 Adj
Slide 49: Supply Chain Blame vs Peers' Record Results (cont.)
While Comtech is Blaming Supply Chain Issues for Disappointing FY22 Guidance, Its Peers Have Announced Record Results (cont.) Peer Management Commentary Kratos Defense & “Though we expect COVID related, supply chain and customer issues the industry and Kratos are experiencing to continue, Security S
Slide 50: Consecutive Quarters Of Negative Market Reactions To Earnings
Comtech Has Lost Investor Confidence as Evidenced by 8 Consecutive Quarters Of Negative Market Reactions To Earnings Announcements 1-day price impact to quarterly earnings announcement (%) Q4 FY21 Investor Presentation ➢ “Financial performance is expected to -0.4 be significantly lower in the first
Slide 51: CMTL's Claims Regarding Backlog And Revenue Visibility Are Nothing New
CMTL’s Claims Regarding Backlog And Revenue Visibility Are Nothing New ➢ Backlog has been range bound since FY18 ➢ Even in 4QFY18 (pre-COVID), CMTL stated it had $1 billion of potential revenue from existing contracts ➢ Despite the $1B in revenue visibility, the mid-point of its FY19 revenue guidanc
Slide 52: Poor Capital Allocation
POOR CAPITAL ALLOCATION Outerbridge
Slide 53: Key Takeaways: Capital Allocation
Key Takeaways: Capital Allocation Mismanagement of the TCS Acquisition Led to a 1 Shareholder Bailout in a Below-Market Secondary Offering Approx. $700M of Shareholder Value Destruction 2 Despite $600M of M&A and $350M of R&D Spending 3 Failure to Generate ROIC in Excess of WACC 53
Slide 54: Comtech Shareholders Did Not Benefit from the Flawed TCS Acquisition
Comtech Shareholders Did Not Benefit from the Flawed TCS Acquisition Pro Forma TCS/CMTL at Announcement vs FY2017 Actual CMTL reported net leverage of 3.85x at close and net LTM Revenue Adj. EBITDA Adj. EBITDA Margin leverage of 3.00x within 12 months CMTL $307.3M $51.8M 16.9% Both TCS and CMTL Reve
Slide 55: TCS Acquisition Was Followed by a Below-Market Secondary Offering
TCS Acquisition Was Followed by a Below-Market Secondary Offering Resulting in Tremendous Shareholder Value Destruction Nov. 2015: TCS Acquisition Announced CMTL Share Price Performance $30.00 11/23/2015: Share price fell 5.5% upon Feb. 2016: TCS Acquisition Closed announcement of TCS acquisition $2
Slide 56: Lack of Confidence in Gilat Acquisition Execution
Investors’ Lack of Confidence in the Board's Ability to Execute the Gilat Acquisition Resulted in a 19% Drop in Share Price Upon Announcement Similar to the TCS transaction, net leverage was expected After a failed TCS deal that required a dilutive secondary to be 3.85x upon closing offering, once a
Slide 57: $950M in Spending Resulted in $700M Of Shareholder Value Destruction
$950M in Spending Since FY2016 Resulted in $700M Of Shareholder Value Destruction +350 1270 -704 +599 566 321 Base Mkt Cap: At Acquisitions R&D Proforma Valuation Shareholder Value Unaffected Mkt Time of TCS Close Destruction Cap before (2/23/2016) Outerbridge Campaign (6/11/2021) *CMTL’s unaffected
Slide 58: ROIC has Consistently Remained Below WACC
ROIC has Consistently Remained Below WACC Providing Further Evidence of Shareholder Value Destruction Return on Invested Capital WACC 7.2 4.5 3.7 2.3 1.0 -10.0 FY17 FY18 FY19 FY20 FY21 Source: FactSet 58
Slide 59: Comtech is Undervalued
COMTECH IS UNDERVALUED Outerbridge
Slide 60: Key Takeaways: Valuation
Key Takeaways: Valuation Comtech’s Valuation Multiple Does Not Fully 1 Reflect the Growing NG911 Business Failure to Provide NG911 KPIs Has Resulted 2 in a Market Drag on Valuation If Valued at Peer Multiples, Comtech’s 911 3 Business could be Worth At Least $700 Million 60
Slide 61: Three Key Businesses Trade At Significantly Different Valuation Multiples
Comtech’s Three Key Businesses Trade At Significantly Different Valuation Multiples Ticker Company Name EV/2022 EBITDA Satellite GILT Gilat Satellite Networks Ltd. 8.8x TDY Teledyne Technologies Incorporated 19.5x VSAT ViaSat, Inc. 8.5x Median 8.8x Gov't/Defense KTOS Kratos Defense & Security Soluti
Slide 62: Investments in NG911 Have Not Translated Into Higher Valuation
Investments in NG911 Have Not Translated Into Higher Valuation Due to Comtech’s Failure to Disclose Public Safety Metrics Why hasn’t Comtech provided detailed If it were valued at peer multiples, Comtech’s 911 Business, which we believe represents around 30% of the Company’s information to allow the
Slide 63: Dilutive PIPE Transaction
DILUTIVE PIPE TRANSACTION Outerbridge
Slide 64: Key Takeaways: Dilutive PIPE Transaction
Key Takeaways: Dilutive PIPE Transaction The PIPE transaction raises numerous concerns 1 for shareholders Penalizes shareholders and places substantial 2 voting power into friendly hands Represents the Board’s blatant efforts to further 3 entrench itself and maintain the status quo 64
Slide 65: Dilutive Vote-Buying Scheme Disguised as a PIPE
The Board's Entrenchment Efforts Culminated with a Dilutive Vote-Buying Scheme Disguised as a PIPE Transaction Summary Reason for Concern Questions Raised for Shareholders Magnetar Capital LLC and Investors White Hat Capital Partners LP Doubtful Use of Funds ➢ “Strategic” initiatives have already ➢
Slide 66: Comtech's Zero Premium PIPE is An Anomaly
Comtech’s Zero Premium PIPE is An Anomaly Compared to Deals In The Last 10 Years1 Conversion Price as a % Of Unaffected Trading Price 145.0% 142.2% How does the 138.5% Board explain accepting a near- zero premium – 130.0% one of the lowest in the last decade? 118.5% 116.7% 115.0% 112.4% 110.0% 100.9
Slide 67: Investors Questioned the Strategic Rationale of the PIPE Deal
Investors Questioned the Strategic Rationale of the PIPE Deal as Reflected by the 6.3% Decline in Share Value Upon Announcement Comtech's “Strategic” Rationale for PIPE: ➢ Completing the build out of the Company’s new technology centers and advanced manufacturing capabilities in Arizona and the Unit
Slide 68: CapEx History Does Not Support Management's Claims for Additional Funding
CapEx History Does Not Support Management’s Claims for Additional Funding Capex 18.00 "In terms of the CapEx requirements and investments we plan to 16.04 make next year, in our releases today we did highlight that we expect [CapEx] could get up to about $30 million. The timing of that is spread out
Slide 69: Board Cannot be Trusted to Carry Out More Large-Scale M&A
Given Comtech's Failed Track Record with Significant Transactions, the Board Cannot be Trusted to Carry Out More Large-Scale M&A Comtech's “Strategic” Rationale for PIPE (continued): ➢ Execute on a disciplined strategy of acquiring and integrating complementary technologies and capabilities to creat
Slide 70: The Financing And Vote-Buying Scheme Dilutes Shareholders' Rights
The Financing And Vote-Buying Scheme Dilutes Shareholders' Rights Shareholder Dilution ➢ With its $100 million investment, White Hat and Magnetar own ~13.5% of outstanding shares, diluting common shareholders by 15% ➢ The highly dilutive transaction further penalizes common shareholders who have alr
Slide 71: The Board Undercut its Own Perceived Valuation of the Stock Price
The Board Undercut its Own Perceived Valuation of the Stock Price How exactly did the Board serve the interest of common shareholders by agreeing to such an egregious financing arrangement that features: ➢ No premium – similar convertible transactions often carry conversion premiums of between 20% a
Slide 72: The Board's Scheme to Maintain the Status Quo
The Board's Scheme to Maintain the Status Quo at the Expense of Shareholders Blatant Entrenchment ➢ The PIPE transaction represents a capstone to the Board’s repeated and blatant efforts to further entrench itself and maintain the status quo at the expense of shareholders ➢ Management gave away shar
Slide 73: Egregious Governance
EGREGIOUS GOVERNANCE Outerbridge
Slide 74: Key Takeaways: Governance
Key Takeaways: Governance 1 Governance Profile is Not Shareholder Friendly Disregard of Shareholder Interests, Sound Governance and 2 Nominating Practices Outerbridge Conducted an Independent Search Process 3 through a Third-Party Firm to Find Nominees with the Expertise Needed to Enhance Shareholde
Slide 75: Comtech's Governance Profile is Unfriendly to Shareholders
Comtech’s Governance Profile is Unfriendly to Shareholders ➢ The Company deploys several outdated features that promote entrenchment including: Problematic Board Features • A combined CEO/Chair • A classified board structure – prevalent in only 34.5% of S&P 600 companies Combined CEO/Chair – Phase-o
Slide 76: Comtech's Governance Profile is Unfriendly to Shareholders (cont.)
Comtech’s Governance Profile is Unfriendly to Shareholders (cont.) ➢ The Board, led by its CEO/Chair Fred Kornberg, who has served as a director for over 50 years since 1971, has been unable to hold Management accountable for its lagging performance, likely due to Fred’s tenure and status on the Boa
Slide 77: Nominee Evaluation Process Marked by Poor Governance
The Nominee Evaluation Process was Marked by Comtech's Poor Governance And Questionable Oversight from the Start Given how Comtech has conducted the interview process with Outerbridge's Nominees, it is clear that the Company does not have the proper governance structures in place to properly vet can
Slide 78: Conflicts Of Interest Demonstrate Disregard for Sound Governance
Conflicts Of Interest Demonstrate an Overall Disregard for Sound Governance Practices The process was led by the three members of the Board with the most obvious conflicts of interest The Nomination Process ➢ After a series of delays, the Board decided to install Involved in the Conflict of Judy Cha
Slide 79: Poor Performance Result of Flawed Board Refreshment Process
Comtech's Poor Performance is a Direct Result of a Flawed Board Refreshment Process that Has Failed to Add Directors with Relevant Industry and M&A Experience Year Added to Board Director Principal Occupation Primary Discipline 2001 Edwin Kantor Executive Director, S2K Financial LLC Finance 2002 Ira
Slide 80: Board Refreshment Based on Personal Relationships
Board "Refreshment" Has Been Based on Personal Relationships Instead of Skills and Relevant Experience [Through Family Connections] Judy Chambers Lisa Lesavoy Michael D. Porcelain COO & CEO-Elect Fred Kornberg Dr. Yacov A. Shamash CEO/Chair Key: Referred by Fred Kornberg Referred by Director with Ex
Slide 81: CMTL's Nominees have Overlapping Expertise Unrelated to Core Businesses
CMTL's Nominees have Overlapping Expertise in Industries that are Unrelated to the Company's Core Businesses Prior Experience Prior Experience CMTL Nominee Industry CMTL Nominee Industry Company Title Company Title Expertise Expertise Managing First Long Island Senior Advisor Finance Principal & Fin
Slide 82: A Board Severely Lacking In Industry Experience
Comtech's Vision: A Board Severely Lacking In Industry Experience Board Experience Prior Operational Industry Experience Tenure Elected by Core Current Board Members Market Gov. (years) Shareholders Public Public Safety Satellite Experience Cap Contracting Independent Directors Up for Election
Slide 83: Outerbridge's Nominees Have the Skill Sets to Fill the Gaps
Outerbridge's Nominees have the Experience and the Skill Sets to Fill the Current Gaps on Comtech's Board Outerbridge Nominees CMTL Nominees Key Aspects of the Business Wendi B. Carpenter Sidney E. Fuchs Judy Chambers Lawrence J. Waldman Commercial Government Current Public Boards / Market Cap
Slide 84: Steps Our Nominees Can Take to Unlock Shareholder Value
Steps Our Highly Qualified Nominees Can Take to Help Improve Performance and Unlock Shareholder Value 1. Conduct a full strategic review, including a potential sale of the Company or divestiture of assets or businesses ➢ Numerous loosely integrated subsidiary businesses may not belong with the corpo
Slide 85: Conclusion
CONCLUSION Outerbridge
Slide 86: Shareholders Must Act Now
Shareholders Must Act Now ➢ Comtech shareholders have suffered under the current Management team and a hand-picked Board with little to no relevant industry and public board experience ➢ Total Shareholder Return has lagged peer median and benchmark indices over 1-year, 3-year, 5-year and 10-year per
Slide 87: Appendix
APPENDIX Outerbridge
Slide 88: Outerbridge / Comtech Detailed Engagement Timeline
Outerbridge / Comtech Detailed Engagement Timeline June 2021 June – July July August August August June 8th – 9th June 28th July 26th – 28th August 1st August 12th August 25th Outerbridge, a large CMTL shareholder Mr. Wallace sends thank you email to Mr. Wallace leaves voicemails on Mr. Mr. Kornberg
Slide 89: Detailed Engagement Timeline (cont.)
Outerbridge / Comtech Detailed Engagement Timeline (cont.) August – September 2021 September September – October October October November August 30th September 8th September 28th October 13th October 18th October 29th Mr. Kornberg responds stating that Outerbridge delivers its nomination Ms. Chamber
Slide 90: Peer Group
Peer Group Ticker Company Name Outerbridge Peer CMTL Peer Rationale for Inclusion AXON Axon Enterprise Inc. ✓ Public Safety comp. ESLT Elbit Systems Ltd. ✓ ✓ GILT Gilat Satellite Networks Ltd. ✓ ✓ KTOS Kratos Defense & Security Solutions, Inc. ✓ Satellite, electronic products, and defense comp. Gov'
Slide 91: Comtech's Misleading Statement Regarding Revenue Transformation
Comtech’s Misleading Statement Regarding Revenue Transformation ➢ CMTL completed the acquisition of TCS in FY16. FY17 was the first full year post-TCS acquisition. ➢ How much of the $372M of ‘new revenue’ was from the TCS acquisition, which had LTM revenue of $364M at the time of the acquisition? ➢
Slide 92: Reported Non-GAAP Operating Income is Understated Relative to Peers
Comtech’s Reported Non-GAAP Operating Income is Understated Relative to Peers Incumbents Responsible for Underreporting “Non-GAAP operating income of $36.1 million…”1 Mike Porcelain COO and Former CFO 2019 2020 2021 Reported Non-GAAP Operating Income (M) 51.8 36.4 36.1 ➢ CMTL excludes Amortization o
Slide 93: CMTL is Adding Two Directors Following the 2021 Annual Meeting
CMTL is Adding Two Directors Following the 2021 Annual Meeting in an Effort to Deprive Shareholders of a Voice ➢ Holders of CMTL Common Stock are entitled to one vote per share. ➢ Holders of CMTL Preferred Stock are entitled to vote with the Joining the Board After the 2021 Annual Tenure Committee/R
Slide 94: CMTL Failed to Warn Shareholders of Afghanistan Withdrawal Risk
CMTL Failed to Warn Shareholders of Risk Factors Related to the Afghanistan Withdrawal Feb. 29, 2020 President Trump negotiates a deal with the Taliban for U.S. troop withdrawal by May 1, 2021 Nov. 17, 2020 Pentagon announces plans to reduce troop levels to 2,500 in Afghanistan and Iraq in final day
Slide 95: Delaware Litigation: Franchi v. Kornberg et al.
Delaware Litigation: Franchi v. Kornberg et al., No. 2021-0919 (Del. Ct. Chancery) ➢ On October 25, 2021, Comtech stockholder Anthony Franchi (“Plaintiff”) commenced a putative class action in the Delaware Court of Chancery on behalf of Comtech stockholders against the Company’s Board, White Hat, an
Slide 96: Delaware Litigation: The Amended Complaint
Delaware Litigation: The Amended Complaint ➢ After Comtech filed a preliminary proxy statement with the SEC on October 29, 2021, Plaintiff filed an Amended Complaint on November 1, 2021. ➢ The Amended Complaint asserts, as an additional basis for Plaintiff’s breach of fiduciary duty claim against th
Slide 97: Delaware Litigation: Settlement Agreement
Delaware Litigation: Settlement Agreement ➢ On November 10, 2021, the parties filed a Stipulation and Proposed Order of Dismissal (the "Stipulation") detailing a settlement agreement reached by the parties. ➢ The key terms of the settlement agreement are: • The Company agreed to file a supplemental
Slide 98: Correcting The Record Around Voting Terms
The Dilutive Financing And Vote-Buying Scheme: Correcting The Record Around Voting Terms Source Filing Description Disclosure Misleading statements “The affirmative vote of a majority of the shares of Convertible Preferred from Management Transaction documents Stock so present at such a meeting at w
Slide 99: Magnetar And White Hat Comparison
Magnetar And White Hat Comparison Stockholder > or < AUM $45 Million < $26 Billion Amount contributed $20 Million < $80 Million to CMTL deal White Hat Co-Founder and Managing Partner Mark R. Quinlan ➢ Why is Mr. Quinlan gaining a seat on the Board when Magnetar Capital LLC contributed the majority o
Slide 100: Comtech Subsidiaries
Comtech Subsidiaries Comtech has before it an obvious opportunity to unlock value through a strategic review of its numerous subsidiaries. As it stands, Comtech is fragmented and not taking advantage of its size to pursue larger opportunities. 100
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