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| 8-K - NATIONAL TECHNICAL SYSTEMS 8-K 1-9-2012 - NATIONAL TECHNICAL SYSTEMS INC /CA/ | form8-k.htm |
Exhibit 99.1
National Technical Systems, Inc.
(NASDAQ: NTSC)
(NASDAQ: NTSC)
Meeting the Growing Demand From Industry and
Government for Skilled Engineering Solutions and Services
Government for Skilled Engineering Solutions and Services
January 2012
Sidoti & Company LLC
Semi -Annual New York Micro-Cap Conference
January 9, 2012
Largest independent provider in U.S. of advanced compliance
testing and engineering services to the aerospace, defense,
testing and engineering services to the aerospace, defense,
telecommunications, automotive and high technology markets
Company Overview
2
EMC/EMI Testing
Fire Testing
Mechanical Testing
Environmental Testing
Shock Vibration Testing
RF/Wireless Testing
ØOne-stop resource for broad range of services
ü Advanced technical product testing and certification
ü Certifications and data accepted in 21 countries
ü Engineering services for Engineering Services Outsourcing (ESO) market
ü Quality systems registration and supply chain management services
ü Special facilities, tools and capabilities
l Munitions, explosives, hazardous materials, ballistic and hydraulic burst tests
l Sophisticated data collection tools, very high-speed cameras, Doppler radar
l LabInsight on-line customer information portal - test data, status reports, etc.
Company Overview
3
Munitions Testing
Hydraulic Burst Testing
ØHeadquartered in Calabasas, CA; 1,100 employees
ØStrategic locations
8
1
1
1
1
1
2
1
3
1
1
4
Company Overview
ØStrong competitive position
ü A few large European companies
ü Mostly small, private local or regional labs in U.S.
ü In-house labs
ØIncreasing market share
ØNational sales force
ØDiversified base of 4,000+ customers
ü Incudes many of the world’s largest/strongest
ü Long-term relationships = consistent year-over-year revenue
Company Overview
5
Principal Customers Include
Principal Industries Served
n Aerospace and Defense
n Telecommunications
n Consumer
n Energy
n Automotive
n Industrial
n Medical
n Other
7
Aerospace & Defense
Telecom
Telecom
Consumer
Consumer
Other
Other
Medical
Medical
Industrial
Industrial
FY 2007 - FY 2011 Financial Highlights
ØFY’ 11 revenues up 58% to $144.1 million from $91.0 million in FY’ 07
ØBacklog grew from 33% of sales in FY’ 07 to 40% in FY’11
ØGross margins improved from 25.3% in FY’ 07 to 27.0% in FY’ 11
8
FY 2007 - FY 2011 Financial Highlights
9
1
1Includes one-time $1.7 million, or $0.16 per diluted share, net of tax gain from sale of property
1Includes one-time $1.7 million, or $0.16 per diluted share, net of tax gain from sale of property
2
FY 2012 Quarterly Financial Highlights
Ø Revenue up due to diversification and geographic expansion
initiatives, offsetting declines due to lower government
spending/funding delays
initiatives, offsetting declines due to lower government
spending/funding delays
Ø Margin declines due in part to underutilization at some facilities and
excess completion costs on a large contract
excess completion costs on a large contract
10
1Results presented are from Continuing Operations
1Results presented are from Continuing Operations
1
Balance Sheet Highlights - 10/31/11
11
|
Cash, cash equivalents,
investments |
$
|
11.3 million
|
|
Working capital
|
$
|
32.5 million
|
|
Total assets
|
$
|
151.4 million
|
|
Total debt
|
$
|
50.0 million
|
|
Total equity
|
$
|
65.0 million
|
Laboratory Testing Market Trends in U.S.
Ø NTS estimates FY 2011 annual revenues in its targeted U.S.
testing market segment at ~$500 to $600 million with stable
growth1
testing market segment at ~$500 to $600 million with stable
growth1
12
NTS
NTS
>25%
>25%
All Others
All Others
<75%
<75%
NTS
NTS
~40%
~40%
All Others
All Others
~60%
~60%
NTS Market Share Growth Estimate FY 2011 - FY 2015
FY 2011
FY 2011
FY 2015
FY 2015
1 Testing market size and growth and NTS’ current and expected market share derived from internal estimates based on
industry data gathered by NTS, the Company’s performance and its extensive experience in its testing market segment
industry data gathered by NTS, the Company’s performance and its extensive experience in its testing market segment
Ø Key market drivers - regulatory, cost-effectiveness, time-to-
market
market
ü Scarcity of qualified engineers, trend towards greater outsourcing
l Engineering projects, new product development, supply chain management
ü Increasing government product safety regulations
ü Third party certification guidelines
Ø Significant barriers to entry
ü Niche specialization, high fixed costs, skilled labor force
ü Expect few new market entrants
Ø Fragmented market with number of smaller participants
ü Acquisition opportunities to expand services and reach
Why NTS is Approaching an Inflection Point
13
14
ØOrganic growth
ü Increase market share through superior service, new offerings
ü Invest in human resources and physical assets to strengthen NTS
ü Expand sales and marketing program
ØStrategic acquisitions
ü Acquire companies that add significant value to NTS
ü Add new, innovative service offerings to expand repertoire
ü Goal to acquire 1 to 2 companies annually
ü Experienced and proven acquisition team to seek, evaluate, acquire
and integrate acquired companies
and integrate acquired companies
ØCommitment to aggressively grow NTS until valuation
metrics improve significantly or strategic exit achieved
metrics improve significantly or strategic exit achieved
Strategy for Growth
Ø ESO market is fast growing, multi-billion dollar market expected
to grow at ~26% CAGR
to grow at ~26% CAGR
Ø NTS launched initiative in March 2009; currently doing selected
design/development ESO projects; drives added testing revenue
design/development ESO projects; drives added testing revenue
Ø Offering more Engineering Services is move up value chain
ü Positions NTS to provide higher-value, higher-margin services
DESIGN
DEVELOP
TEST
Engineering
Services
Services
Engineering
& Evaluation
& Evaluation
NTS Engineering Services (“ESO”) Initiative
15
ØGrowing source of additional revenue
ØLeverages Company’s large customer base
ØMoves NTS up the services value chain
ØMargins can increase - not a commodity business
ØDevelops closer working relationships with customers
ØDrives additional NTS testing business
Why Engineering Services Outsourcing?
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ØChicago-based Ingenium Testing in July 2011
ü $12.5 million in cash, plus performance earn out
ü 12 fully-automated test chambers in one of the most modern
EMC/EMI testing facilities in North America
EMC/EMI testing facilities in North America
ü Customer base, capabilities and services in aerospace, heavy
industry, automotive markets, all among NTS' core competencies
industry, automotive markets, all among NTS' core competencies
ü Gives NTS major presence in the very important Chicago region
l Includes Wisconsin, Indiana, Michigan, Illinois
l Second largest U.S. market for NTS' testing and engineering
services
services
ü Plan to expand facilities and resources
Recent Strategic Acquisitions
18
ØPittsfield, MA-based Lightning Technologies in Sept
2011
2011
ü $6.0 million in cash, plus performance earn out
ü Engineering services and testing laboratory specializing in lightning
protection
protection
ü Customer base, capabilities and services in aerospace, construction,
wind power generation markets, complements current capabilities
wind power generation markets, complements current capabilities
ü Expands NTS’ commercial aerospace business, strengthens non-
defense industry businesses
defense industry businesses
ü NTS currently only U.S. firm that can test, certify commercial aircraft
to meet all requirements of FAA’s specification DO160
to meet all requirements of FAA’s specification DO160
Recent Strategic Acquisitions
ØQ4 FY 2012
ü Performance expected to improve from Q3 FY 2012
l Gross margins expected to increase
l SG&A expected to increase due to expanded sales program
ØFY 2013
ü Revenues expected to increase to $164 million to $169 million
l Expected revenues do not include any FY 2013 acquisitions
ü SG&A as a percentage of sales expected to decline from FY 2012
l Acquisition and legal cost expected to decline
ü Additional guidance metrics including expected ranges of EBITDA
and gross margins to be provided in early February 2012
and gross margins to be provided in early February 2012
ü Plan to update quarterly
Outlook
19
20
Ø Largest independent, advanced technical testing services
company in U.S. with experienced/effective management team
company in U.S. with experienced/effective management team
Ø Strong competitive position with increasing market share
Ø Diversified base of 4,000+ customers; international presence
Ø Increasing trends towards outsourcing testing, registration,
engineering services driving market
engineering services driving market
Ø Acquisition opportunities to expand business
Ø Solid 5-year growth trends, positive outlook for FY 2013
Ø Committed to aggressively grow NTS until valuation metrics
improve substantially or strategic exit achieved
improve substantially or strategic exit achieved
Summary
21
Forward Looking Statements
The content of this presentation and statements made and/or answers given to
questions during this presentation that relate to future plans, events or
performance are forward-looking statements that involve risks and uncertainties,
including risks associated with uncertainties pertaining to customer orders,
demand for services and products, development of markets for the companies'
services and products, market growth and other risks identified in the companies'
SEC filings. Actual results, events and performance may differ materially.
Participants in this presentation are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date hereof. The
company undertakes no obligation to release publicly the result of any revisions to
these forward-looking statements that may be made to reflect events or
circumstances after the date hereof or to reflect the occurrence of unanticipated
events.
questions during this presentation that relate to future plans, events or
performance are forward-looking statements that involve risks and uncertainties,
including risks associated with uncertainties pertaining to customer orders,
demand for services and products, development of markets for the companies'
services and products, market growth and other risks identified in the companies'
SEC filings. Actual results, events and performance may differ materially.
Participants in this presentation are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date hereof. The
company undertakes no obligation to release publicly the result of any revisions to
these forward-looking statements that may be made to reflect events or
circumstances after the date hereof or to reflect the occurrence of unanticipated
events.
January 2012
National Technical Systems, Inc.
(NASDAQ: NTSC)
(NASDAQ: NTSC)
Meeting the Growing Demand From Industry and
Government for Skilled Engineering Talent and Services
Government for Skilled Engineering Talent and Services
January 2012
Sidoti & Company LLC
Semi -Annual New York Micro-Cap Conference
January 9, 2012