corporate overview...bradley support –what we do… bradley fighting vehicle back-up sight...
TRANSCRIPT
CORPORATE OVERVIEW
FORWARD-LOOKING STATEMENT
This presentation includes forward-looking statements that are subject
to many risks and uncertainties. These forward-looking statements,
such as statements about Optex’s short-term and long-term growth
strategies, can sometimes be identified by use of terms such as
“intend,” “expect,” “plan,” “estimate,” “future,” “strive,” and similar
words.
These statements involve many risks and uncertainties that may cause
actual results to differ from what may be expressed or implied in these
statements. These risks are discussed in Optex’s Securities and
Exchange Commission filings and reports, including the risks identified
under the section captioned “Risk Factors” in its Form 10-K.
Optex disclaims any obligation to update information contained in
these forward-looking statements whether as a result of new
information, future events, or otherwise.
THIS PRESENTATION DOES NOT CONSTITUTE AN OFFER TO SELL SECURITIES
OF OPTEX OR A SOLICTATION OF AN OFFER TO BUY SECURITIES OF
OPTEX.
2OPTEX Overview March 2020
PRESENTATION CONTENTS
3OPTEX Overview March 2020
1. What we do/make
2. Sustainable competitive advantages
3. What the market opportunity is
4. Who are the competitors
5. Clearly articulated business strategy
6. Brief financial overview
WHAT WE DO…
4OPTEX Overview March 2020
CustomersOptexThreat
Defense
Offense
OPETX STANDS BETWEEN THE THREAT AND OUR CUSTOMERS.
ABRAMS SUPPORT – WHAT WE DO…
ICWS Periscope
Assembly (M1A2 Only)
M1 Head Assembly
(M1A1/M1A2)
EMI Defroster
Window
Laser
FilterUnity Mirror
Assembly
(M1A1/M1A2)
M1 Head Mirror
Assembly Gunners
Primary Sight
(M1A1/M1A2)
CWSS
Commanders Weapon
Station Sight
(M1A1 Only)
Periscope Assembly
Driver's Unity (Short)
(M1A1/M1A2)
Periscope Assembly
Driver's Unity (Long)
(M1A1/M1A2)
MRS
Collimator Assembly
(M1A1/M1A2)
Mirror Assembly
Gunners Primary Sight
(M1A1/M1A2)
Periscope Assembly
Commander Side
(M1A1 Only)
Periscope Assembly
Commander Front
(M1A1 Only)
5OPTEX Overview March 2020
BRADLEY SUPPORT – WHAT WE DO…
Bradley Fighting VehicleBack-Up Sight
Periscope Assembly
15 Degree Periscope
Assembly
M45 Periscope
Assembly
M17 Periscope
Assembly
M27 Periscope
Assembly
20 Degree Periscope
Assembly
Optex Systems Inc.
Military Artillery Fire
Control Systems
www.optexsys.com
OPTEX Overview March 2020 6
STRYKER – LAV SUPPORT – WHAT WE DO…
Stryker/LAV Family of VehiclesM27 Periscope
Assembly
(Turret Version)
M17 Periscope
Assembly
M45 Periscope
AssemblyVision Block Assembly
LS Periscope
Assembly
(MGS Version)
LS MRS Collimator
Assembly (MGS
Version)
Optex Systems Inc.
Military Artillery Fire
Control Systems
www.optexsys.com
OPTEX Overview March 2020 7
OPTEX PRODUCTS – WHAT WE DO…
Periscopes
M Series
ICWSLaser & Non-Laser Protected
Acrylic & Glass Periscopes
Sighting Systems
CSS, MRS
Big Eye, etc.Digital Day and Night (DDAN)
Muzzle Reference Systems (MRS)
Ships Binoculars, Collimators, etc.
AOC (Applied Optics Center)
Optical Cells, Eyepiece,
Objective Lens SetsOptically aligned metal
and glass lens sets
Laser Interference
Filters, ENVG Filters, Optical Coatings
Components – Laser Filter Units
OPTEX Overview March 2020 8
OPTEX PRODUCTS – WHAT WE DO…
DDAN / M36 Sights Laser Protected Periscopes M17 Day/Thermal Periscope Back Up Sight
Naval Binoculars Howitzer Products
Red Tail
– Digital Spotting Scope
Commercial
Optical Assembly
OPTEX Overview March 2020 9
SUSTAINABLE COMPETITIVE ADVANTAGES…
10OPTEX Overview March 2020
Building Patented and Proprietary Niche Products for over 30 YearsDesigned in Protection through Patents and Manufacturing Process Knowledge
Vertical Integration (Machining, Coating, Assembly of Optical Parts)Multiple Barriers to Entry
Highest Share in our US Market for Major Product LinesExcellent Economy of Scale through Suppliers and Factory Hours
Expanding Market (Europe and Middle East) through ITAR Registration and PartnershipsITAR Gets you to the
Table
Approved Supplier to: General Dynamics, BAE Systems, L3 Harris Technologies, US DoD, Israel – Ministry of Defense, Lockheed Martin
Growing Revenue, Increasing Margins, Increasing Earnings
(Scale)
Clean Capitalization Table and Healthy Balance Sheet (Robust)
Minimal
CapEx needs
CEO/CFO own 11.4% of Out-standing Shares –Aligned with Shareholders
MARKET SHARE, CUSTOMERS, AND COMPETITORS
Periscopes & Vision Blocks Markets Sighting Systems Markets
UK
Germany
SouthKorea
Israel
75%US
20 – 30%Worldwide
MHI
US $10 – 20MM
Worldwide
$40 – 50MM
5%US
0.5 – 1%Worldwide
US $100MM
Worldwide
$500MM – $1B
UK
Norway
Belgium
UK
OPTEX Overview March 2020 11
OPTEX BUSINESS STRATEGY
Optex has established core competencies by proving its product reliability and product
quality and by maintaining deep product and sector knowledge in an overall supply
chain control environment.
MA
RK
ETS
PRODUCTS
PRESENT NEWP
RESEN
TN
EW
Market Retention
• Optical Engineering
• Mechanical Sighting Systems
• Assembly Processes
Product Development
• New Periscope Technology Enhancement
• New Sighting Systems
Market Development
• Commercial Markets
• Foreign Military Sales Expansion
Diversification
• Opportunistic Commercial and Military
Product Development
OPTEX Overview March 2020 12
FINANCIALS – GROWING REVENUE, GROWING MARGINS
Revenue vs. Gross Margin
1st Half Revenue 2nd Half Revenue Gross Margin
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
$0
$5
$10
$15
$20
$25
$30
2014 2015 2016 2017 2018 2019
Gross
Margin
Revenue
in Millions
OPTEX Overview March 2020 13
FINANCIALS – WARRANT ANALYSIS
Growing Revenues with Increasing Gross Margins are generating significant Working Capital with no Debt and little need for CapEx.
With Warrants Exercised before Maturity
With Warrants Exercised at Maturity (cashless)
Stock Price (2/19/2020) $2.18 $2.18
Shares Outstanding (MM) 8.5 8.5
Warrants at $1.50 (MM) 4.1 1.3
Total Potential Shares (MM) 12.6 9.8
Equity Capitalization (MM) $27.52 $21.34
Cash (12/29/19) (MM) $1.68 $1.68
Warrant Proceeds (MM) $6.19 $–
Debt (12/29/19) (MM) $0.60 $0.60
Enterprise Value (MM) $20.26 $20.26
EV/LTM Revenue .83× .83×
Adjusted EBITDA 2019 (MM) $3.68 $3.68
EV/LTM Adj. EBITDA 5.5× 5.5×
Adjusted EBITDA Q120 (MM) $0.81 $0.81
OPTEX Overview March 2020 14
FINANCIALS Q120 – CHANGE IN FAIR VALUE ON WARRANTS
This is a non cash value
representing the change in
estimated warrant liabilities for
outstanding warrants which is
driven by fluctuations in the
stock volatility rates, market
share prices, interest rates,
future dividends and term
of the outstanding warrants.
The liability would only apply
in the event of a fundamental
change of the entity such as:
amendment of the articles of
incorporation, mergers and
share exchanges, transfers
of corporate assets,
entity dissolution.
Three months ended
December 29, 2019
December 30, 2018
Revenue $5,887 $5,891
Cost of Sales 4,420 4,448
Gross Margin 1,467 1,443
General and Administrative Expense 749 743
Operating Income 718 700
(Loss) Gain on Change in Fair Value of Warrants (1,251) 1,385
Interest Expense (5) (6)
Other (Expense) Income (1,256) 1,379
(Loss) Income Before Taxes (538) 2,079
Income Tax Expense, net $141 $54
Net (Loss) Income $(679) $2,025
OPTEX Overview March 2020 15
FINANCIAL HIGHLIGHTS / VALUATION
OPTEX Overview March 2020 16
Twelve months ended
(Thousands)
Metric September 29, 2019 September 30, 2018 % Change
Revenue $ 24,530 $ 20,853 17.6
Gross Margin $ 6,253 $ 4,515 38.5
Gross Margin % 25.5% 21.7% 17.5
Operating Income $ 3,197 $ 1,486 115.1
Gain on Change Fair Value of Warrants $ 1,344 $ 95 1,314.7
Net Income Applicable to Common Shareholders $ 3,800 $ 930 308.6
Adjusted EBITDA (non GAAP) $ 3,680 $ 1,996 84.4
1. Revenue Growth
2. Margin Growth
3. Earnings Growth
4. No Debt
5. Clean Cap Table
6. Majority Independent
Board – NASDAQ
Compliant
HIGHLIGHTS
7X EBITDA = ~$3.00 Share Price, 10X EBITDA =~$4.33 Share Price
SUMMARY
Market
Opportunity
Product
Portfolio
Proven Acquisition
Strategy
Customer
Base
• $1 Billion worldwide
• Increasing market share
(commercial and foreign)
• Identify targets’ critical capabilities and synergies
• Seek vertical integration and
operational bench strength
• Attractive purchase price
• Highest quality
• Innovative product development
• New product launches
• International foothold
• Major defense customers
• Top commercial customers
• Government & Primes
OPTEX Overview March 2020 17
BUSINESS DIVISIONS OVERVIEW – BACKUP DATA
OPTEX SYSTEMS HOLDINGS, INC.
OPTEX SYSTEMS
~60% of Revenue
APPLIED OPTICS CENTER
~40% of Revenue
• Laser Protected Periscopes and Vision Blocks
• Military Optical Sighting Systems
• Weapon Systems, Optical Subassemblies
• High Definition Imaging Systems
• Thermal and Night Vision Systems
• Premier Thin Film Coatings
• Blocks Unwanted Wavelengths
• Eliminates Unwanted Reflections
• Protects Sensors and Optics
• Precision Optical Assembly Processes
• Stabilized Monoculars and Binoculars(Military & Commercial)
OPTEX Overview March 2020 18
SELECT MAJOR CUSTOMERS
Defense Customers Commercial Customers
OPTEX Overview March 2020 19
LEADERSHIP TEAM
Danny Schoening – CEO
30 years in Engineering, Manufacturing,
Optics, and Business Leadership; holds
3 US Patents. Previously with Honeywell
International (HON) and Finisar
Corporation (FNSR).
Karen Hawkins – CFO
27 years in Defense and Transportation.
Previously with General Dynamics (GD).
Joe Aizpuru – Engineering Manager
30 years in Engineering/Optics.
Holds 11 US Patents. Previously
with Honeywell International (HON)
and Finisar Corporation (FNSR).
Ed Franco – Materials Manager
30 years in Materials and Supply
Chain Management. Previously
with Honeywell International (HON)
and Finisar Corporation (FNSR).
Former US Army Logistics Officer.
Jeff Balch – Quality Manager
30 years in Optical Assembly
and Optex Experience.
Angelina Kerr – Contracts and ITAR
Compliance Manager
20 years in Project Management
and Contracts Support.
Bill Bates – General Manager
– AOC Division
34 years in Optics and Military and
Commercial Contracting. Previously
with L-3 Communications (LLL).
Ron Stinedurf – Manufacturing Manager
37 years in Optical Fabrication
and Manufacturing.
Al Gibson – Senior Thin Film
Coating Engineer
35 years in Thin Film Coatings with a
background in Aerospace Engineering.
OPTEX Overview March 2020 20