norsat international inc.€¦ · for remote and challenging applications norsat works with many...

Copyright © 2017 Norsat International Inc.

Norsat International Inc.

Investor Presentation May 2017


Statements in this presentation relating to matters that are not historical fact are

forward-looking statements.

These are based on current expectations, forecasts and assumptions that involve risks and

uncertainties that could cause actual outcomes and results to differ materially from those

outlined in the forward-looking statements.

Factors that could cause or contribute to such differences include, but are not limited to:

general economic conditions, changes in technology, reliance on suppliers, managing rapid

growth, global sales risks, limited intellectual property protection, competition, mergers and

strategic transactions by competitors, the continued availability of existing bank loans and

credit facilities and other risks and uncertainties described in Norsat’s public filings with

securities regulatory authorities.

While all efforts are made to ensure the accuracy of the information, Norsat assumes no

liability for incorrect, incomplete, or missing information from this presentation. Past

performance is not necessarily indicative of future performance.

2

Innovative Communication Solutions

Forward Looking Statements

Copyright © 2017 Norsat International Inc. 3


Company Overview

• Norsat International, Inc. (TSX: NII;

NYSE MKT: NSAT) designs and

manufactures highly specialized

products and solutions to enable

wireless communications in remote

and challenging environments.

Areas of focus:

• Satellite Communications (ground

terminal-based)

• Land Mobile Radio (LMR)

Infrastructure $18.0 $20.0

2016 Sales by Category

Land Mobile Radio

SatelliteCommunications

*Satellite Communications includes historical Satellite and Microwave segments; LMR includes Sinclair

Dollar figures in US millions.



Turnaround Story Now Executing…



Company Highlights

➢ $8.2 millionQ1, 2017 Revenues

➢ 41%Gross Margins

➢ 19% Adjusted EBITDA Margin TTM

➢ $0.04Q1, 2017 Earnings per Share

➢ 10Consecutive Years of

Profitability

➢ 8.54Price / Adjusted EBITDA TTM

$42.4

$36.4 $36.2 $36.1$38.0

$36.7

$0

$5

$10

$15

$20

$25

$30

$35

$40

$45

2012 2013 2014 2015 2016 TTMQ1

2017

Revenue

$4.8$5.1

$4.7

$5.3

$7.6

$6.9

$0

$1

$2

$3

$4

$5

$6

$7

$8

2012 2013 2014 2015 2016 TTMQ1

2017

Adjusted EBITDA

$U

S M

illio

ns

$U

S M

illio

ns

Q1, 2017 Highlights• Norsat launched the expansion of its Ka-band product lines with the

launch of the ATOM 50 Watt Ka-band BUCs and SSPAs, and industry

leading 4- and 5-band LNBs

• In January 2017, Norsat received an approximate $3.8 million order from

U.S. Defense Agency for its GLOBETREKKER 2.0 portable satellite

terminals

• In March 2017, Norsat entered into an arrangement agreement with

Hytera pursuant to which Hytera will acquire Norsat for $10.25

• In April 2017, Norsat received an unsolicited, conditional, non-binding

proposal from Privet to acquire Norsat for cash consideration of $11.00

per share


Industry Leader in Niche Market Segment

Compelling Market Trends To Expand Communications Footprint

Integrated Product Offerings to Meet the Unique Needs of Customers

Strong International Presence with Elite Customer Base

New Product Opportunities Providing Added Growth

Proven Track Record of Successful Acquisition Integration

Strong Cash Flows and Effective Cost Controls




Remote:

• Climate issues

• Harsh environments

• Little/zero infrastructure

• Middle of nowhere

7

Remote and Challenging Applications

Challenging:

• Space constraints

• Weight

• Underground

• On-the-move applications



Norsat is a provider of unique and customized communications solutions

for remote and challenging applications

Norsat works with many customers in various industries.

Prime target industries for Norsat:

Norsat is NOT focused on

the low cost, high volume

communications market like

satellite TV

Target Industries

Public SafetyMaritimeMilitary Aerospace Resources Rail



Competitive Advantages

• Norsat’s unique

platform technology

allows for quick

customization, tailored

to meet the needs of

customers

• Strong reputation

• Reliable, ruggedized

and extremely durable


Customization

Cu

sto

me

r R

ete

nti

on

Benefits of Customization• Increase customer satisfaction

• Increase brand equity

• Reduce price sensitivity –

differentiated

• Increase customer loyalty/retention

• Greater insight in creation of product

roadmap


Customizable Platform Technology

Estimated $500M annualized market opportunity for customized communications

solutions in remote and challenging applications segment and consistently growing.



Custom Product Cycle

Custom

Requirements

Norsat

Custom

Development

Norsat

Standard Part

Phase I Phase II

New

Customers

… Phase N

Repeat orders using same customized part number

5 – 10 Years



Engineering Expertise

• Leading-edge designs & extensive

technology expertise

• In-house engineering department

(+30 engineers and technical staff)

• Team gives Norsat flexibility to customize

and deliver quickly!


Innovative Communication SolutionsMarket Trends for Remote &

Challenging

Businesses, governments,

organizations and individuals need

to be always “connected”, no matter

where they may be.

• Remote sites far removed from existing

infrastructure

• Instantaneous media

• Safety concerns in transportation - need

to be connected at all times

• Military operations require mobility and

rapid establishment of communication

links in the field

• Contingency communication plans or

emergency action plans for business

continuity


Land Mobile Radio

RF Conditioning Products

Antennas


Product Area Focus

Satellite Communications

Satellite Solutions

Microwave Products

48% of 2016 Sales

52% of 2016 Sales

16




+40 years of providing satellite

products

Satellite equipment includes:

• portable satellite terminals

• maritime terminals

• satellite receivers (LNBs)

• transmitters (BUCs)

• transceivers

• solid-state power amplifiers

(SSPAs)

Diverse customer base, serving

the military, government,

broadcast and commercialRevenues: 35-50% of total

Margins: 30-45%

Transmit

Receive



Land Mobile Radio (Sinclair)

+60 years of providing antennas and

RF conditioning products

Portfolio of over 2,000 distinct

products, including:

• base station antennas

• mobile/transit antennas

• covert antennas

• filters

• receiver multi-couplers, and

accessories

Diverse customer base, serving the

public safety, defense, security,

natural resources and transportation

industryRevenues: 50-65% of total

Margins: 40-45%



Revenue Breakdown by Division

$20.2

$24.2$22.5

$21.7

$18.8

$20.0 $20.3

$0

$5

$10

$15

$20

$25

2011 2012 2013 2014 2015 2016 TTM Q12017

Land Mobile Radio

$17.6$18.3

$13.9$14.5

$17.3$18.0

$16.5

$0

$5

$10

$15

$20

$25

2011 2012 2013 2014 2015 2016 TTM Q12017


Satellite Comm.

$18.0 48%LMR $20.0 52%

FY 16

Satellite Comm.

$17.3 48%

LMR $18.8 52%

FY15

US Dollar figures in millions

$U

S M

illio

ns

$U

S M

illio

ns



International Presence

• Products sold in 90+ countries

• 10 sales offices

• Network of 300+ Resellers

spanning the United States,

Europe, Middle East, Africa,

Asia & Latin America

• Serving 20+ Militaries and

Government Organizations



23

Growth Opportunities: ATOM Series

Key features and competitive edge:

• Size - Up to 85% smaller than equivalent

products

• Weight – Up to 90% less than competing

products

• Ultra efficient/less power consumption

• Ideal for applications such as Airborne, Comms-

on the Move, and replacement of tube amplifiers

• Received multi-million order from Harris Corp.

soon after launch of product

• Launched Ka-band, in December 2015

ATOM Series of Block Upconverters (BUCs)

and Solid State Power Amplifiers (SSPAs)

Market opportunity for ATOM

estimated to be $50M annualized


Researching

Coming Soon

Available Now

Ka-Band Series

25W 50W 100W

X-Band Series

50W 100W

Ku-Band Series

40W25W 100W 250W 50W


ATOM Family Product Development



Comms-on-the-Move

• BUCs and SSPAs for unmanned ISR,

ground vehicles, manned aircraft and

flyaway VSATs

• Unique features/benefits including:

• Small size for simplified integration and space saving

• Low weight to reduce overall payload or transport weight

• Low power consumption for lower power demand

and/or increased battery life

• Low heat dissipation for simplified cooling and

improved reliability

Radar Solutions

• BUCs and SSPAs for remote sensing

radar, ground weather radar, search

and rescue, UAV weather radar

• Unique features/benefits including: • Fast Switching for power savings

▪ High Reliability for longer operating life

▪ Low Voltage for simpler operation and higher reliability

Growth Opportunities: Satellite Comm.



26

Growth Opportunities: Positive Train Control

Source: The HNTB Companies, July 2011: White Paper: Positive Train Control

• More derailments occurring due to

heavier loads or operator failure, but

could be rectified with better, modern

communications systems

• Norsat’s LMR and Satcom Divisions,

offer components and custom antennas

that assist train operators seeking to

comply with government-mandated PTC

• Norsat products already designed and

used by Class I railroad operators. Rest

of industry following and implementing

systems already proven by Class I

Positive Train Control (PTC)

PTC project opportunity to Norsat

estimated to be $40-60M in total



Completed Acquisitions

Sinclair Technologies – Acquired January 2011

• Ontario-based Land Mobile Radio company

• Purchase price: $18.5M; Financed with $3.75M cash, $12.75M in

debt and $2.0M shares

• Acquired for product offerings, new and diverse customers, deep

company history and strong reputation in industry

• Cornerstone acquisition, stabilized revenue base

Norsat has successfully completed two acquisitions, which have been quickly integrated and

were immediately accretive to shareholders.

CVG – Acquired April 2013

• US-based satellite communications company

• Purchase price: $0.5M; Financed with cash from operations

• Acquired for IP to advance new products

• Shipped in excess $3.0 million of new product as a result of integration within first year



Strong Balance Sheet$U

S M

illio

ns

• No bank debt since June 30, 2015

• Debt paid down with cash flow, no equity raises

• ~$3M per year in debt pay down + interest coverage

$6.30

-$5.50

-$1.90 -$1.10

$3.10$4.60

$15.00 $15.63$14.70 $14.50 $14.50$16.10

$19.41

$26.56 $27.17

-10

-5

0

5

10

15

20

25

30

Dec'10 Dec'11 Dec'12 Dec'13 Dec'14 Dec'15 Dec'16 Mar'17

Net Cash Net Working Capital, excluding the Acquisition Loan

$12.75


Accretive

30


Synergies

Product or market

extensions

Advance core

business

Acquisition Targets

Constantly evaluating potential

candidates that are leaders in their

field and meet core acquisition

criteria of:

• Advance our core business

communications for remote and

challenging applications.

• Gain product or market extensions

• Niches that value good quality

products that can be configured

for specific applications with a

fast delivery time

Potential target

Strong IP base and

R&D Focus



Strong, Consistent Financial Performance

32

11%* 11%*14%*

13%*16%*

$37.8

$42.4

$36.4 $36.2 $36.2$38.0

$36.7

$0

$5

$10

$15

$20

$25

$30

$35

$40

$45

2011 2012 2013 2014 2015 2016 TTMQ1

2017

Revenue

$4.2

$4.8$5.1

$4.7

$5.3

$7.6

$6.9

$0

$1

$2

$3

$4

$5

$6

$7

$8

2011 2012 2013 2014 2015 2016 TTMQ1

2017

Adjusted EBITDA

11% 11%

14%13%

15%

20%19%

0%

5%

10%

15%

20%

25%

2011 2012 2013 2014 2015 2016 TTMQ1

2017

Adjusted EBITDA Margin

$0.71

$0.83$0.89

$0.81$0.90

$1.30

$1.17

$0.00

$0.20

$0.40

$0.60

$0.80

$1.00

$1.20

$1.40

2011 2012 2013 2014 2015 2016 TTMQ1

2017

Adjusted EBITDA Per Share

$U

S M

illio

ns

$U

S M

illio

ns



Recent Highlights

• Norsat launched the expansion of its Ka-band product lines with the launch of the ATOM

50 Watt Ka-band BUCs and SSPAs, and industry leading 4- and 5-band LNBs.

• In January 2017, Norsat received an approximate $3.8 million order from U.S. Defense

Agency for its GLOBETREKKER 2.0 portable satellite terminals.

• In March 2017, Norsat entered into an arrangement agreement with Hytera pursuant to

which Hytera will acquire all the issued and outstanding shares of Norsat for $10.25 in

cash per share. The Arrangement will be subject to the approval of Norsat shareholders

and regulatory approvals.

• In April 2017, Norsat received an unsolicited, conditional, non-binding proposal from

Privet to acquire Norsat for cash consideration of $11.00 per share.


Market Cap:

US $64.88M *CA $85.49M *

Number of Employees:

184

34


At A Glance

*As of May 1, 2017

Ticker:

TSX: NII

NYSE MKT: NSAT

Stock Price:

US$4.45 NYSE MKT *

CA$6.08 TSX *

52-Week Range:

US $3.28 - $5.75 *

CA $5.00 - $7.05 *

Ticker:

TSX – NIINYSE MKT – NSAT

Stock Price:

US $10.85*

CA $14.82*

Common Shares Outstanding:

5.85 million

52-Week Range:

US $5.33 - $10.95*

CA $6.98 - $14.91*



Outlook

Near-Term

Longer-Term



• Satellite Communications division is

expected to have revenue improvements

driven by the ATOM Series of Ku & Ka-

Band BUCs and SSPAs and the delivery of

portable satellite terminals from

several orders into 2017.

• Land Mobile Radio division’s revenue to

remain strong due to gradual

improvements of the U.S. economy.

• Maintain profitability and strengthen

capital structure.

36

Near-Term Outlook



• Broaden product and services

portfolio

• Diversify into new market verticals

such as: commercial, resource,

transportation and public safety

sectors

• Continue to focus on R&D

• Add sticky revenue streams

• Pursue business combination

opportunities

• Maintain profitability

37

• Revenue$100 M

• EBITDA Margin

>15%

Longer-Term Strategy


Thank You

38


Contact information:

Dr. Amiee Chan Arthur Chin

President & CEO Chief Financial Officer

Tel: 604 821-2800 Tel: 604 821-2800

Email: [email protected] Email: [email protected]

Thank You

norsat international inc.€¦ · for remote and challenging applications norsat works with many...

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