Kvh Industries, Inc. · NASDAQ:KVHI
Kvh Industries — Proxy Contest (May 2021)
42 slides from Kvh Industries's proxy contest presentation, May 27, 2021
Slide 1: The Case for Change at KVH Industries, Inc.
THE CASE FOR CHANGE AT KVH INDUSTRIES, INC. PREPARED BY VIEX CAPITAL ADVISORS, LLC MAY 2021
Slide 2: Disclaimer
DISCLAIMER The materials contained herein (the “Materials”) represent the opinions of VIEX Capital Advisors, LLC and the other participants in its proxy solicitation (collectively, “VIEX”, the “Investor Group” or the “VIEX-led investor group”) and are based on publicly available information with res
Slide 3: Table of Contents
TABLE OF CONTENTS Executive Summary The Need for Stockholder-Driven Change Our Two Aligned, Experienced Nominees Appendix
Slide 4: Executive Summary
EXECUTIVE SUMMARY
Slide 5: Why Stockholder-Driven Change Is Needed Right Now at KVHI
WHY STOCKHOLDER-DRIVEN CHANGE IS NEEDED RIGHT NOW AT KVHI KVHI’s insular, founder-dominated Board has presided over dismal financial performance and poor corporate governance for many years The VIEX-led investor group represents KVHI’s largest stockholder and is spending its own capital on a campaig
Slide 6: What to Expect from KVHI
WHAT TO EXPECT FROM KVHI We expect KVHI will claim to have a clear strategy despite failing to clearly articulate one for years prior to this contest We expect KVHI to claim that it is poised to pivot to a momentum phase post-pandemic despite continuing to lose money in Q1 2021 We expect KVHI to tou
Slide 7: About VIEX
ABOUT VIEX We have a history of helping fix broken, founder-controlled companies just like KVHI Firm Overview • Founded in 2014 by Eric Singer, VIEX is an investment management firm that specializes in analyzing and investing in small capitalization companies across the technology sector • The firm
Slide 8: VIEX Is Proposing the Right Remedy at the Right Time
VIEX IS PROPOSING THE RIGHT REMEDY AT THE RIGHT TIME Nominees John Mutch and Eric Singer have decades of experience addressing bad governance, poor performance and persistent operating issues at technology companies John Mutch Eric Singer Deemed the “fix-it man” by The San Widely recognized as an ar
Slide 9: VIEX's Slate Has Superior Experience and Ownership Perspectives
VIEX’S SLATE HAS SUPERIOR EXPERIENCE AND OWNERSHIP PERSPECTIVES KVHI needs a credible Board refresh that adds experienced individuals with meaningful ownership perspectives – not hastily chosen nominees wedged into a defensive refresh Prior Public Board Prior Public Turn- Technology Industry Softwar
Slide 10: About KVHI
ABOUT KVHI KVHI is a founder-dominated company focused on manufacturing products that enable mobile communication, navigation and direction sensing Mobile Connectivity Business KVHI Financial Snapshot* • KVHI designs, develops, and manufactures mobile connectivity products and • Founded: 1982 servic
Slide 11: KVHI Has a Long History of Underperformance
KVHI HAS A LONG HISTORY OF UNDERPERFORMANCE Although KVHI has underperformed over every relevant time horizon, we believe its 10- year TSR underscores the perpetual stagnation under the current Board 400% $1 invested in KVHI a decade ago is worth less today 350% 333.75% 307.20% 300% 250% 200% 162.73
Slide 12: KVHI Has a Long History of Diluting Stockholders
KVHI HAS A LONG HISTORY OF DILUTING STOCKHOLDERS Since early 2016, KVHI has issued more than three million shares and provided significant equity to the insiders and directors who have presided over stagnation KVHI Outstanding Shares 19,000,000 18,500,000 18,000,000 17,500,000 17,000,000 16,500,000
Slide 13: KVHI Has a Long History of Anti-Stockholder Governance
KVHI HAS A LONG HISTORY OF ANTI-STOCKHOLDER GOVERNANCE KVHI’s “founder model” has produced insular governance that can only be remedied through a stockholder-driven director refresh Classified Board Structure Combined Chair-CEO Role Two Insiders on the Board Supermajority Required for No Ability to
Slide 14: KVHI Has Rebuffed Our Good Faith Efforts to Compromise
KVHI HAS REBUFFED OUR GOOD FAITH EFFORTS TO COMPROMISE The Board rejected our offers to settle for one designee, opting instead to threaten to challenge our nomination and spend more than 5% of KVHI’s cash position on a fight April 30, 2021 May 1, 2021 May 2, 2021 May 3, 2021 • The Board claims that
Slide 15: KVHI Has Opted to Pursue a Defensive, Insufficient Refresh
KVHI HAS OPTED TO PURSUE A DEFENSIVE, INSUFFICIENT REFRESH Rather than engage in good faith, the Board has nominated director candidates with no public turnaround experience, no governance acumen and no ownership perspectives • KVHI retained a search firm to identify nominees a month after our direc
Slide 16: KVHI Disclosed It Will Use 5% of Its Cash Position to Fight Us
KVHI DISCLOSED IT WILL USE 5% OF ITS CASH POSITION TO FIGHT US The incumbents have retained a small army of consultants and are projected to spend $2 million to fight change, even though the Company took millions of dollars in PPP money Law Firm Proxy PR Firm Solicitor Defense Private Advisor Invest
Slide 17: KVHI Is Running a Dishonest Campaign Heavy on Attacks and Spin
KVHI IS RUNNING A DISHONEST CAMPAIGN THAT IS VERY HEAVY ON ATTACKS AND SPIN – BUT LIGHT ON SUBSTANCE MANAGEMENT’S MISREPRESENTATIONS REALITY ✓ The Company consistently dilutes investors, provides lucrative jobs to X KVHI says “we have always pursued the interests of our shareholders the Chairman’s f
Slide 18: KVHI Is Trying to Character Assassinate Mr. Singer by Mischaracterizing the PLX Case
KVHI IS DESPERATELY TRYING TO CHARACTER ASSASSINATE MR. SINGER BY MISCHARACTERIZING THE PLX CASE MANAGEMENT’S MISREPRESENTATION REALITY ✓ Since the 2018 PLX case, Mr. Singer’s fellow directors at A10 and Immersion have repeatedly renominated him, and leading independent proxy advisory firms supporte
Slide 19: A Closer Look: The Need for Stockholder-Driven Change
A CLOSER LOOK: THE NEED FOR STOCKHOLDER-DRIVEN CHANGE
Slide 20: 25 Years of Stagnation Under Martin Kits van Heyningen and His Board
25 YEARS OF STAGNATION UNDER MARTIN KITS VAN HEYNINGEN AND HIS BOARD During Mr. Kits van Heyningen’s 25-year directorship, KVHI has delivered dismal performance – reinforcing the need for independent stockholders in the boardroom TSR Under Mr. Kits van Heyningen’s Tenure 4/2/1996 – 1/14/2021* 1000%
Slide 21: 10 Years of Pronounced Underperformance
10 YEARS OF PRONOUNCED UNDERPERFORMANCE KVHI has underperformed across every relevant time horizon during the last decade and the stock’s recent uptick can be largely attributed to our significant purchases and public engagement Long-Term TSR KVHI vs. Relevant Indices 400% 350% 300% 250% 200% 150% 1
Slide 22: In Recent Years, KVHI Has Consistently Lost Money
IN RECENT YEARS, KVHI HAS CONSISTENTLY LOST MONEY While KVHI may claim to have undertaken a Board refresh, its operating results in recent years are emblematic of a mismanaged and poorly overseen business Net Income (Losses) in USD for 2016-2020 40,000,000 30,000,000 20,000,000 10,000,000 0 *KVHI so
Slide 23: It Is Easy to Underperform When You Have a Disengaged Board
IT IS EASY TO UNDERPERFORM WHEN YOU HAVE A DISENGAGED BOARD As KVHI has continued to underperform in recent years, its Board has met less and less – culminating in just four meetings in 2020 during the global COVID-19 pandemic Board Meetings Per Year Number of Board Year 10 Meetings 9 8 2016 9 7 6 2
Slide 24: VIEX's Slate of Financial Experts Brings Superior Governance Experience
VIEX’S SLATE OF FINANCIAL EXPERTS BRINGS SUPERIOR GOVERNANCE EXPERIENCE AND OWNERSHIP PERSPECTIVES COMPARED TO THE INCUMBENT BOARD Prior Public Board Prior Public Turn- Technology Industry Software and Cloud Nominees Sizable Stockholder Financial Expert Experience Around Experience Expertise Experie
Slide 25: There Are Numerous Unaddressed Governance Issues at KVHI
THERE ARE NUMEROUS UNADDRESSED GOVERNANCE ISSUES AT KVHI KVHI maintains an array of onerous governance policies that must be addressed Supermajority Vote to A Classified Board Structure Amend Bylaws Multiple Boardroom Insiders Combined Chairman and CEO and Nepotism No Action By Written Consent A Dis
Slide 26: Boardroom Issue #1: Classified Board Structure
BOARDROOM ISSUE #1: CLASSIFIED BOARD STRUCTURE A classified Board structure has prevented stockholders from driving true change at Annual Meetings and makes the 2021 Annual Meeting a critical election • The Company’s classified Board structure allows only: Director Committee Positions Age Tenure o T
Slide 27: Boardroom Issue #2: Combined Chairman and CEO Role
BOARDROOM ISSUE #2: COMBINED CHAIRMAN AND CEO ROLE Combining these positions negatively affects the independence of the Board and ability of stockholders to hold leadership accountable • Martin Kits van Heyningen has served as both the Chairman of the Board and the CEO since 2007 • We believe that K
Slide 28: Boardroom Issue #3: Concerning Nepotism at KVHI
BOARDROOM ISSUE #3: CONCERNING NEPOTISM AT KVHI Mr. Kits van Heyningen’s wife and daughter-in-law have been awarded generous compensation under his watch • Mr. Kits van Heyningen’s wife – Kathleen Keating – has served as KVHI’s Creative Director for 34 years o Ms. Keating was awarded $250,813 in tot
Slide 29: Boardroom Issue #4: Multiple Boardroom Insiders
BOARDROOM ISSUE #4: MULTIPLE BOARDROOM INSIDERS The current Board has allowed two effective insiders to remain in the boardroom, despite their respective 30+ year tenures with KVHI • Just three years after the conclusion of over thirty years of service to KVHI, the Board recently determined that Jam
Slide 30: Boardroom Issue #5: No Action by Written Consent
BOARDROOM ISSUE #5: NO ACTION BY WRITTEN CONSENT KVHI’s Bylaws contain anti-stockholder provisions that prevent investors from taking necessary action No Action by Written Consent KVHI’s Bylaws flatly prohibit stockholders from taking or approving any action by written consent, thereby requiring all
Slide 31: Boardroom Issue #6: Supermajority Vote Required to Amend Bylaws
BOARDROOM ISSUE #6: SUPERMAJORITY VOTE REQUIRED TO AMEND BYLAWS AND CALL A SPECIAL MEETING By requiring a supermajority vote, KVHI limits its stockholders’ ability to incite change Supermajority Vote to Amend Bylaws and Call a Special Meeting KVHI’s Bylaws state that any amendment or repeal of the p
Slide 32: Boardroom Issue #7: Strategic Missteps and Inadequate Oversight
BOARDROOM ISSUE #7: STRATEGIC MISSTEPS AND INADEQUATE OVERSIGHT We believe the incumbent Board has had no sense of urgency in addressing its costly, strategic blunders • Despite the significant recent losses and management of ~700 employees, the Board only met five times in each of the fiscal years
Slide 33: Boardroom Issue #8: Lack of Ownership Perspectives
BOARDROOM ISSUE #8: LACK OF OWNERSHIP PERSPECTIVES We believe the incumbent directors’ meager stock ownership demonstrates that they are not adequately aligned with KVHI stockholders • KVHI’s independent directors collectively beneficially own ~5% of the Company’s outstanding shares – most of which
Slide 34: Boardroom Issue #9: A Poorly-Constructed, Reactionary Board Refresh
BOARDROOM ISSUE #9: A POORLY-CONSTRUCTED, REACTIONARY BOARD REFRESH We believe the Board’s self-refresh is reactionary in nature and does not address one of the core issues plaguing this Board: a complete lack of governance experience • While we welcome the addition of two new, diverse directors to
Slide 35: Our Solution: Two Aligned, Qualified Nominees
OUR SOLUTION: TWO ALIGNED, QUALIFIED NOMINEES
Slide 36: Our Slate Is the Right Remedy for KVHI
OUR SLATE IS THE RIGHT REMEDY FOR KVHI In addition to valuable technology industry experience, our candidates will bring sorely- needed alignment, financial expertise and ownership perspectives to the Board John Mutch Eric Singer ✓ Financial expert with over 30 years of public and private ✓ Demonstr
Slide 37: Our Slate Will Ask the Right Questions and Initiate the Right Debates
OUR SLATE WILL ASK THE RIGHT QUESTIONS AND INITIATE THE RIGHT DEBATES Messrs. Mutch and Singer have a history of holding management teams and their fellow directors accountable John Mutch Eric Singer Aviat Networks (NASDAQ: AVNW): Since Mr. Mutch joined the board Immersion Corporation (NASDAQ: IMMR)
Slide 38: How Our Slate Will Add Value in the Boardroom
HOW OUR SLATE WILL ADD VALUE IN THE BOARDROOM Messrs. Mutch and Singer would work collaboratively with the incumbents to pursue a practical agenda that includes: Implementing Stockholder- Advocating for Extended Establishing a Disciplined Friendly Governance Cost Containment Capital Allocation Polic
Slide 39: Appendix
APPENDIX
Slide 40: John Mutch
JOHN MUTCH John Mutch is a seasoned operating executive and investor in the technology industry with over 30 years of public and private company experience and a track record of creating stockholder value John Mutch has served as managing partner of MV Advisors LLC, a strategic block investment firm
Slide 41: Eric Singer
ERIC SINGER Eric Singer has demonstrated financial expertise and significant experience serving as a director on the Boards of various public technology companies Eric Singer has served as the managing member of VIEX GP, the general partner of Series One, VSO GP II, the general partner of VSO II, an
Slide 42: Vote the WHITE Proxy Card
VOTE THE WHITE PROXY CARD INFO@SARATOGAPROXY.COM