92 slides from Comtech Telecommunications's investor day presentation, Aug 1, 2023
Slide 1: Slide 1
Slide 2: Investor Day 2023
ome ®, COMTECH g i INVES OR DAY (2023 _ a Fluent in the Future”
Slide 3: Robert Samuels, Chief Investment Officer
ROBERT SAMUELS CHIEF INVESTMENT OFFICER
Slide 4: Legal
4 Certain information in this presentation contains forward-looking statements that are subject to the safe harbors created under the Securities Act of 1933 and the Securities Exchange Act of 1934. These statements are based on current expectations, estimates, forecasts, and projections about the in
Slide 5: Agenda
5 AGENDA Time (MT) Section Speaker 8:00 – 8:15 AM Welcome Robert Samuels, Chief Investment Officer Ken Peterman, Chief Executive Officer 8:15 – 9:15 AM Management Presentations Maria Hedden, Chief Operating Officer 9:15 – 9:30 AM Break Daniel Gizinski, Chief Strategy Officer 9:30 – 10:00 AM Manageme
Slide 6: 3Q Results
6 3Q Results 3Q FY 2023 $133.7M $136.3M $131.1M Since the beginning of Ken’s tenure as Revenues CEO in 1Q FY23, we have met or beat Q1FY23A Q2FY23A Q3FY23A guidance and sequentially grown our $12.5M revenues and Adjusted EBITDA margins $11.3M every quarter. $10.7M Adjusted EBITDA Q1FY23A Q2FY23A Q3F
Slide 7: What's New?
7 New Leadership WHAT’S NEW? New Strategy Everything is New… New Culture New Brand New Opportunities New Markets New Comtech
Slide 8: Comtech
COMTECH Fluent in the Future”
Slide 9: Ken Peterman, Chief Executive Officer
KEN PETERMAN CHIEF EXECUTIVE OFFICER
Slide 10: Introduction
INTRODUCTION WELCOME TO CHANDLER
Slide 11: One Comtech
11 ONE COMTECH New Leadership Embracing Rapid Change Driving Profitable Growth Rebuilding Investor Confidence
Slide 12: Exceptional People, Opportunity, Results
1 EXCEPTIONAL PEOPLE 2 EXCEPTIONAL OPPORTUNITY 3 EXCEPTIONAL RESULTS
Slide 13: Planned, Purposeful Transformation
PLANNED, PURPOSEFUL TRANSFORMATION
Slide 14: Everything Has Changed
EVERYTHING HAS CHANGED
Slide 15: Discovery, Implementation, Transition
DISCOVERY IMPLEMENTATION TRANSITION System Lean Operating Initiatives Software Processes Growth Initiatives Solutions People EVOKE Services Insights AHEAD OF SCHEDULE INITIATED UPCOMING
Slide 16: Leadership
16 LEADERSHIP Maria Hedden Daniel Gizinski Nicole Robinson Anirban Chakraborty Mike Bondi Chief Operating Chief Strategy Chief Growth Chief Technology Chief Financial Officer Officer Officer Officer Officer
Slide 17: Driving Profitable Growth
● One Comtech is working, and at 10 months, our turnaround is already driving DRIVING results PROFITABLE ● We are expecting double digit sales growth, & Adjusted EBITDA is expected to grow faster GROWTH ● We are focused on a series of near-term opportunities ● We expect that our EVOKE innovation fou
Slide 18: Maria Hedden, Chief Operating Officer
MARIA HEDDEN CHIEF OPERATING OFFICER
Slide 19: Business Transformation Update
BUSINESS TRANSFORMATION UPDATE
Slide 20: Convergence
20 CONVERGENCE Everyone at Comtech is fully bought into Will Comtech be the idea of massive convergence and hybridization of communications networks, ready to truly and the opportunity to create huge value from that convergence by amplifying the benefit from this power of connectivity with intellige
Slide 21: Yes
QO COMTECH YES Fluent in the Future
Slide 22: The Work
22 ORGANIZATION, THE WORK PROCESSES & SYSTEMS Three key workstreams, each interrelated, each creating a durable foundation for Comtech’s future state WORKFORCE OPERATIONS & EXECUTION
Slide 23: Closing the Gap
23 CLOSING THE GAP ** We have not quantitatively reconciled Adjusted EBITDA and Adjusted EBITDA margin to the most directly comparable GAAP measure because items such as stock-based compensation, adjustments to the provision for income taxes, amortization of intangibles and interest expense, which a
Slide 24: Illustrative Scenarios
24 ILLUSTRATIVE SCENARIOS ILLUSTRATIVE FORECASTING MODEL – NOT GUIDANCE Illustrative Profit Improvement & Lean Initiatives FY23 Guidance (Midpoint) Impact (assumes 15% Adj EBITDA margin) Annual Revenue Growth 0% 5% 10% 15% 20% Scenarios* Revenues $542 $542 $569 $596 $623 $650 Adjusted EBITDA** $49 $
Slide 25: Codifying Our Cost Savings
25 CODIFYING OUR 30% COST SAVINGS 40% 30% Organization, Process and Systems Workforce Operations and Execution
Slide 26: Organization, Processes & Systems
ORGANIZATION, PROCESSES & SYSTEMS
Slide 27: Annual Cost Savings Contribution: 30%
ANNUAL COST SAVINGS CONTRIBUTION: 30%
Slide 28: One Business
28 ONE BUSINESS Wherever or however a customer comes into contact with Comtech, regardless of the problem they need to solve, we have people and a culture in place to ensure the resources of the entire organization are brought to bear on delivering a solution.
Slide 29: Ahead of Schedule
29 AHEAD OF Completed: supply chain SCHEDULE assessment, implementation launched Amplifying the work we have done to Completed: standardizing consolidate and rationalize Comtech’s ERP system operations through delivering best-in- class common functional processes to our Completed: standardizing busi
Slide 30: Workforce
OQ COMTECH WORKFORCE fd \
Slide 31: Annual Cost Savings Contribution: 30%
ANNUAL COST SAVINGS CONTRIBUTION: 30%
Slide 32: The Right People
32 THE RIGHT PEOPLE Redundant positions eliminated globally We’re attracting great people. YoY reduction in voluntary turnover We’re retaining great people. We’re holistically managing our global Priority positions targeted: injecting new talent workforce. We launched our first enterprise-wide Key e
Slide 33: Operations & Execution
OPERA OQ COMTECH IONS & EXECU oi & ION
Slide 34: Annual Cost Savings Contribution: 40%
ANNUAL COST SAVINGS CONTRIBUTION: 40%
Slide 35: Grow Smart
35 GROW SMART Comtech corporate EHS program Ensure we have a platform and culture in place that allows Comtech to sell Improvement in on-time delivery solutions and intelligence, and not across all sites simply equipment: cultivating business acumen to sustain a growth-minded, Acceleration in busine
Slide 36: Two Core Businesses
36 TWO CORE BUSINESSES TM Organizational improvements have increased collaboration, efficiency, and operating performance. Satellite & Space Terrestrial & Wireless Communications Networks
Slide 37: Terrestrial and Wireless Networks
37 TERRESTRIAL AND WIRELESS NETWORKS We are expanding our services to multiple customers and markets, beyond public safety.
Slide 38: Leader in Location-Based Services
LEADER IN LOCATION- BASED SERVICES
Slide 39: Launchpad for Future Growth
39 LAUNCHPAD FOR FUTURE GROWTH 5G and location applications to M2M/AI Analytic Globalization of Existing expand/reach into Insights, SmartNG Capabilities commercial markets Our deep history in public safety and location-based services provides a stable Location-Based Services & NG911 Capabilities fo
Slide 40: Location-Based Services
40 LOCATION-BASED SERVICES Comtech’s cutting-edge location services can provide market-leading accuracy for our customers to locate anyone or anything with precision.
Slide 41: Satellite & Space Communications
41 SATELLITE & SPACE COMMUNICATIONS Satellite Modem & Troposcatter & SATCOM Amplifier Technologies Technologies Comtech’s Satellite & Space Communications segment meets or exceeds the highest standards for performance and quality worldwide. Space Components High-Power & Antennas Amplifiers & Switche
Slide 42: We Are Everywhere
42 WE ARE • Protected & Assured Communications EVERYWHERE • X/Y Antennas for LEO Constellations • Global Depot, Maintenance & Field Service teams • Beyond-Line-of-Site Communications (Troposcatter) • Electronic Components Supply Chain Management
Slide 43: One Comtech Works
43 ONE COMTECH WORKS We measure our success every day, through improving our performance for each other, our customers, and our shareholders.
Slide 44: Daniel Gizinski & Nicole Robinson
DANIEL GIZINSKI & NICOLE ROBINSON CHIEF STRATEGY OFFICER & CHIEF GROWTH OFFICER
Slide 45: Comtech: #1 Strategic Goal: Growth
QO COMTECH: #1 STRATEGIC GOAL: GROWTH
Slide 46: The World Takes Connectivity for Granted
THE WORLD TAKES CONNECTIVITY FOR GRANTED WHICH MEANS WE CANNOT
Slide 47: Number of Operational Satellites
47 2022 NUMBER OF OPERATIONAL SATELLITES From 1,000 in 2013 to 7,316 in 2022 7x increase in number of satellites (includes commercial & government) 2013 Bryce Tech, SIA research
Slide 48: 5G SATCOM Market
2022 2032 5G SATCOM MARKET Projected *Recent BIS research
Slide 49: U.S. Space Force Budget
2024e U.S. SPACE FORCE BUDGET - 2023 ACTUAL AND REQUESTED 2022
Slide 50: Everything Has Changed
es Rv a Lae at “ » _ <} Fluent inthe Futore* € é ae ~ oe it
Slide 51: Ahead-of-the-Market Ambition
AHEAD-OF-THE-MARKET AMBITION
Slide 52: Density Tailwind
52 DENSITY 50,000+ 2030 TAILWIND Ever-more-ubiquitous commercial satellites mean more and faster 4,000 connections and ever more pervasive 2022 connectivity among people and devices. 1 1962 *GAO estimates
Slide 53: Solutions
53 SOLUTIONS We will grow by offering better insights and solutions from existing customers, leveraging business units drawing on a common core of expertise
Slide 54: It's Happening Now
APPENING NOW Fluent in the Future”
Slide 55: Connecting the Unconnected
CONNECTING THE UNCONNECTED Nearly 100 million people in Indonesia lack internet access on a mobile device 1 in 5 US Households do not have internet access *World Bank, NTIA estimates
Slide 56: At the Center of Converging Markets
56 $10B+ GEOSPATIAL By 2030* INSIGHTS AT THE $745B+ By 2030* CENTER OF DIGITALIZATION DATA SERVICES CONVERGING MARKETS $1B+ By 2028* GROUND as a SERVICE $115B+ By 2028* *Research and Markets, "Global Satellite Ground Station Market - Forecast to 2028”, ReportLinker, “Global Satellite Modem Market Si
Slide 57: Geospatial Insights
57 GEOSPATIAL INSIGHTS Satellite-based earth observation market is expected to reach $11.3 billion in 2031 Euroconsult data
Slide 58: From Pixels to Insights
FROM PIXELS TO INSIGHTS 2 5 2 5 fired a = ad = ‘~ e o = x
Slide 59: Specificity Delivers Value
59 SPECIFICITY DELIVERS VALUE
Slide 60: Demonstrating Our Value
60 Insights at the Edge DEMONSTRATING UI with real time processing knowledge graph and proposed COAs OUR VALUE The value Comtech brings to the geospatial community is in AI/ML Processing & Analytics demand: two demonstrations X-Band S-Band with premier earth observation Downlink TT&C companies will
Slide 61: Smart Infrastructure
SMART INFRASTRUCTURE
Slide 62: One Comtech
62 ONE COMTECH A single source for converging solutions across industry sectors including defense, agriculture and automotive, uniting requirements from data security to safety and regulation, across both hardware and software.
Slide 63: A Half-Century of Experience
A HALF-CENTURY OF EXPERIENCE… …THAT’S NEVER BEEN MORE VALUABLE
Slide 64: Anirban Chakraborty, Chief Technology Officer
ANIRBAN CHAKRABORTY CHIEF TECHNOLOGY OFFICER
Slide 65: What Is EVOKE?
65 WHAT IS EVOKE? The Next Industrial Revolution a.k.a. Industry 4.0 EVOKE is a technology accelerator program The Humanization of the Internet for Comtech employees and partners for pioneering new business ideas by being customer-outcome centric. Outcomes, Not Just Products Zero Trust as the New Cu
Slide 66: The Industry Wave
66 THE INDUSTRY WAVE Need 3 As-A-Service 2 Agile Software 1 Performance Inflection Point: 2 Inflection Point: 1 Time FY22 FY25
Slide 67: Customer Type
67 Consumability CUSTOMER TYPE Time to Flexible Market Self Security Optimizing Service Provider Govt Enterprise
Slide 68: Key Pillars
68 AI/ML KEY PILLARS Cloud Web 3.0 XR Blockchain Exchange Edge IoT Connectivity Ubiquity
Slide 69: The Industry Wave Deep Dive: Performance
69 THE INDUSTRY WAVE DEEP DIVE: 1 Performance Best products at lowest TCO Semiconductor/Hardware ADOPTION ● ● ● Throughput Custom features Density & power Programmability ● Performance ● Reliability ● Special Algorithms Efficiency ● Spectrum & Link ● Concurrent users ● Cost per bit
Slide 70: The Industry Wave Deep Dive: Agile Software
70 THE INDUSTRY WAVE DEEP DIVE: 2 Agile Software Cloud & Automation Open ADOPTION ● ● ● Architecture Interfaces Leverage Webscale Cloud Native ● Scalable ● Stateless ● Cloud Agnostic Automation ● Multi vendor & domain ● AI/ML enabled ● Zero touch
Slide 71: The Industry Wave Deep Dive: As-A-Service
71 THE INDUSTRY WAVE DEEP DIVE: 3 As-A-Service Evolved Business models Network as a software ADOPTION ● ● ● Intent based API Private Networks Data driven
Slide 72: What Does It Mean for Comtech?
72 WHAT DOES IT MEAN FOR COMTECH? 1 Core 2 Core Adjacencies 3 EVOKE-driven Growth T&W T&W Outcome-As-A-Service • WEA • Commercial LBS • Overall SI • 5G Location Apps Competency • 5G SMSC • Add OTT location • 5G-NTN • 911 Call end-end platform • Data-driven Handling • Apply routing design • Int’l NGC
Slide 73: EVOKE Panel Discussion
QO COMTECH EVOKE PANEL DISCUSSION Fluent in the Future”
Slide 74: Michael Bondi, Chief Financial Officer
MICHAEL BONDI CHIEF FINANCIAL OFFICER
Slide 75: Fiscal 2023
75 Appointed New President and CEO FISCAL 2023 Enhanced Management Team Implemented Profit Improvement Initiatives Grew Our Pipeline of Opportunities Launched EVOKE Innovation Foundry Partnered With Proven Technology Innovators Refreshed Our Board of Directors On Pace for YoY Sales and Adjusted EBIT
Slide 76: Platform for Improved Performance
76 PLATFORM FOR IMPROVED PERFORMANCE Revenue Operating Capital Free Cash Flow Capital Growth Leverage Efficiency Conversion Allocation
Slide 77: Illustrative Growth Prospects
77 ILLUSTRATIVE GROWTH PROSPECTS Potential Contribution Potential Contribution to Revenue Growth to Adjusted EBITDA Growth (FY23-FY26) (FY23-FY26) (Excludes Unallocated) Core Core Adjacencies EVOKE-driven growth
Slide 78: Operating Leverage Plan
78 OPERATING LEVERAGE PLAN Revenue Growth Cost Structure Bottom Line Growth from Multiple Optimization and At or Above Sources Efficiencies Revenue Growth
Slide 79: Improving Capital Efficiency
79 IMPROVING CAPITAL EFFICIENCY Build out of Basingstoke, UK and Chandler, AZ facilities conclude in FY23 CapEx Trends Upfront buildout phase of multiple NG911 statewide deployments wind down, as Public Safety Answering Points go live on monthly recurring services ● Commonwealth of Pennsylvania ● St
Slide 80: Secured Leverage Ratio
80 SECURED LEVERAGE RATIO 4.00x 3.50x 3.00x 2.5x 2.50x RANGE 2.00x 1.50x 2.0x 1.00x 0.50x 0.00x FY19A FY20A FY21A FY22A Q3 FY23A FY26* Actual * Goal Revenue Growth + Cost Optimization + As a Service Models + Lower CapEx Support Deleveraging * Represents illustrative secured leverage ratio
Slide 81: Capital Allocation Priorities
81 CAPITAL ALLOCATION PRIORITIES SHORT TERM MID TERM LONG TERM Invest in Strengthen Our Mergers & Share Repurchases 1 Our Business 2 Balance Sheet 3 Acquisitions 4 and Dividends EVOKE Reduce investments in Acquire technologies to Consistently operate within working capital accelerate growth secured
Slide 82: Investment Highlights
82 Potential to achieve double digit annual revenue growth rate in FY23 and beyond INVESTMENT Adjusted EBITDA growth rate expected to exceed revenue HIGHLIGHTS growth rate Cost structure optimization and operational disciplines drive lower expected spend Lower expected spend generates free cash flow
Slide 83: Customers Will Purchase Insights, Not Just Connectivity
CUSTOMERS WILL PURCHASE INSIGHTS, NOT JUST CONNECTIVITY
Slide 84: Comtech Is Uniquely Positioned
COMTECH IS UNIQUELY POSITIONED
Slide 85: Comtech: Fluent in the Future
OQ COMTECH Fluent in the Future”
Slide 86: Driving Profitable Growth
● One Comtech is working, and at 10 months, our turnaround is already driving DRIVING results ● We are expecting double digit sales PROFITABLE growth, and Adjusted EBITDA is expected to grow faster GROWTH ● We are focused on a series of near-term opportunities ● We expect that our EVOKE innovation f
Slide 87: Fluent in the Future: Thank You
FLUENT IN THE FUTURE THANK YOU
Slide 88: Appendix
OQ COMTECH APPENDIX
Slide 89: Reconciliation of CMTL GAAP to Non-GAAP Financial Measures
Reconciliation of CMTL GAAP to Non-GAAP Financial Measures 89 Notes (1) See statement regarding the use of Non-GAAP financial measures at beginning of presentation. (2) Dollar amounts in thousands. Comtech’s fiscal year end is July 31.
Slide 90: Reconciliation of CMTL GAAP to Non-GAAP Financial Measures
90 Reconciliation of CMTL GAAP to Non-GAAP Financial Measures 90 Notes (1) See statement regarding the use of Non-GAAP financial measures at beginning of presentation. (2) Comtech’s fiscal year end is July 31. (3) Totals may not foot due to rounding. (4) Non-GAAP net income and EPS reflect Non-GAAP
Slide 91: Reconciliation of CMTL GAAP to Non-GAAP Financial Measures
Reconciliation of CMTL GAAP to Non-GAAP Financial Measures 91 91 Notes (1) See statement regarding the use of Non-GAAP financial measures at beginning of presentation. (2) Dollar amounts in thousands. Comtech’s fiscal year end is July 31.
Slide 92: Reconciliation of CMTL GAAP to Non-GAAP Financial Measures
Reconciliation of CMTL GAAP to Non-GAAP Financial Measures 92 92 Notes (1) See statement regarding the use of Non-GAAP financial measures at beginning of presentation. (2) Dollar amounts in thousands, except per share information. Comtech’s fiscal year end is July 31. (3) Totals may not foot due to