Quarterly Report - Janes Capital · 2021. 1. 26. · Engines & Engine Systems Connectors...

Aerospace & DefenseQuarterly Report

Q4 2020Not affiliated with Jane’s Information Group

Quarterly UpdateQ4 2020

Aerospace & Defense

1 Executive Summary

2 About Janes Capital Partners

3 Top 5 M&A Deals

4 M&A Deal Volume

5 A&D Transaction Multiples

6-7 Public Valuation Summary

8 Buyer Spotlight

9 Deal Spotlight

10 Platform Spotlight

11-17 All M&A Transactions

There were 113 A&D deals announced in Q4 2020, which was anincrease from the number of deals announced during Q3 2020.

Year-over-year quarterly transaction volume increased by 2.7%compared to the 110 deals announced during Q4 2019.

Average disclosed deal size during the quarter increased to $584million compared to $248 million during Q3 2020.

The most active segments in terms of number of M&A deals were:

– Government Services, IT Services and Software (29 deals)

– Defense Electronics (13 deals)

– Cybersecurity, Intelligence Services and Homeland Defense (12deals)

– Machined & Cast Parts (12 deals)

– MRO & Logistics (11 deals)

The top 3 segments in terms of disclosed transaction values were:

– Cybersecurity, Intelligence Services and Homeland Defense($4,800 million)

– Government Services, IT Services and Software ($4,163 million)

– Engines & Engine Systems ($4,016 million)

Number of Deals by Quarter

In this issue EXECUTIVE SUMMARY

1

Note: Disclosed deals shown include transactions that disclose price, multiple or both

2838 30 35

5331 36 28 36 27

8 1530

78 6364

74

82

87 7379

7475

6062

83

106101

94

109

135

118109 107 110

102

6877

113

0

20

40

60

80

100

120

140

160

17-4Q 18-2Q 18-4Q 19-2Q 19-4Q 20-2Q 20-4Q

Num

ber

of

Dea

ls

Disclosed Not Disclosed


Aerospace & Defense

Contact Information

19200 Von Karman Avenue, Suite 340, Irvine, California 92612T: (949) 769-3323 F: (949) 769-3327 www.janescapital.com

Janes Capital Partners gathers its data from sources it considers reliable; however, it does not guarantee the accuracy orcompleteness of the information provided within this publication. The material presented reflects information known to theauthors at the time this presentation was prepared, and this information is subject to change. Janes Capital Partners makesno representations or warranties, expressed or implied, regarding the accuracy of this material.

Securities offered through JCP Securities, Inc., a Registered Broker/Dealer and Registered Investment Advisor; MemberFINRA and SIPC. Janes Capital Partners, Inc. and JCP securities, Inc. are affiliated companies.

No portion of this report may be reproduced in any form without the express written permission of Janes Capital Partners.Janes Capital Partners is a federally registered U.S. trademark.

Copyright 2021, Janes Capital Partners, Inc. All rights reserved.

Janes Capital Partners specializes in Mergers & Acquisitions (M&A) for middle market Aerospace& Defense companies. Our clients are Aerospace & Defense companies with enterprise valuesbetween $25 million and $500 million. The team at Janes Capital Partners has completed over 75transactions within the Aerospace & Defense industry. Through this M&A experience, we provideour clients with unparalleled access to potential acquirers in the aerospace and defense industryalong with in-depth knowledge of the industry and its dynamics. Our clients receive high touchservice from accomplished professionals with extensive A&D transaction and industryexperience.

Janes Capital Partners is a member of Oaklins, the world's most experienced mid-market M&Aadvisor, with 850 professionals globally and dedicated industry teams in 45 countries worldwide.

Oaklins is the world’s most experienced mid-market M&A advisor, with over 850 professionalsglobally and dedicated industry teams in more than 45 countries. We have closed 1,700transactions in the past five years.

Recent Transactions

About Janes Capital Partners

Stephen Perry Managing Director & CEOOffice: (949) 769-3323 Ext. 6901Mobile: (949) [email protected]

Jason KimballVice PresidentOffice: (949) 769-3323 Ext. 6903Mobile: (949) [email protected]

Ken FukumotoVice PresidentOffice: (949) 769-3323 Ext. 6904Mobile: (831) [email protected]

Chris ReineckeAssociateOffice: (949) 769-3323 Ext. 6905Mobile: (714) [email protected]

2

Acted as Financial Advisor to

on its sale to


on its sale to


on its sale to

Acted as Financial Advisor to Acted as Financial Advisor to

on its sale to


on its acquisition of



on its sale to


GC Atlas Holdings


Aerospace & Defense

Valuation Metrics

Target Target Description AcquirorAnnounced

DateImplied TEV

($M)TEV/

RevenueTEV/

EBITDADeal Type(s)

PU

PU PB

PS I

PU

PU PB

Forcepoint offers a leading portfolio of cybersecurity solutions,helping enterprises worldwide monitor and protect networks,

endpoints, data, and users. Forcepoint delivers a portfolio of human-centric cybersecurity capabilities that incorporate behavior basedinsights, including risk adaptive data loss prevention; user and entitybehavior analytics (UEBA) and cloud access security broker (CASB)

capabilities; insider threat solutions; next-generation firewall(NGFW) technology; cloud and on premise web and email security;and cross domain transfer products.

10/26/20

$1,682.5 2.0x

MTS Systems is a global supplier of advanced test systems, motionsimulators and precision sensors. The company provides test and

measurement solutions to determine the performance and reliabilityof vehicles, aircraft, civil structures, biomedical materials anddevices and raw materials. MTS Systems' testing and simulationhardware, software and service solutions help customers

accelerate and improve their design, development andmanufacturing processes and are used for determining themechanical behavior of materials, products and structures.

12/09/20

$1,100.0

15.2x

1.7x na

10.0x

2.0x 14.1x

PA Consulting is an innovation and transformation consulting firm

supporting defence and security, consumer and manufacturing,government, health and life sciences, transport, energy and utilities,and financial services markets. The company's 3,200 employees arestrategists, innovators, designers, consultants, digital experts,

scientists, engineers and technologists. PA Consulting operatesacross the globe from offices across the U.K., U.S., Europe, and theNordics.

12/07/20 $3,400.0 1.5x

Aerojet Rocketdyne is a technology-based engineering andmanufacturing company that develops and produces specialized

power and propulsion systems, as well as armament systems.Aerojet Rocketdyne develops and manufactures liquid and solidrocket propulsion, air-breathing hypersonic engines, and electricpower and propulsion for space, defense, civil and commercial

applications. Principal customers and end users include the DoD,NASA, The Boeing Company, Lockheed Martin Corp., RaytheonTechnologies Corp., and United Launch Alliance ("ULA").

12/20/20 $4,016.1

na

The Federal IT and Mission Support Services Business of NorthropGrumman provides a wide range of advanced technology solutions

including cybersecurity, data analytics, cloud, mission-criticalapplication development and advanced engineering to defense,intelligence, space, civil and health customers. The business isexpected to generate $2.3 billion in revenue in 2020, of which $1.6

billion of which is in the Defense Systems sector, $0.5 billion is in theMission Systems sector and the remaining $0.2 billion is in the SpaceSystems sector.

11/30/20 $2,394.8 3.3x

Top 5 M&A Deals this Quarter

Source(s): CapIQ, Dacis, company reports, press releases

Private Equity SellerPS Private Equity BuyerPBPublic SellerPU Private SellerPR International DealI

3

Federal IT and Mission Support

Services Business


Aerospace & Defense

M&A Deal Volume

Average Size of Disclosed Deals and Total Disclosed Volume(last 13 quarters)

Number of Deals by Segment(Q4 2020)

Average deal size increased over last quarter from $248M to $584M

– Total disclosed deal volume totaled $17.5B, an increase of more than

$13.8B from Q3 2020

There were 113 A&D deals announced in Q4 2020, which was an increase

from the 77 deals announced during Q3 2020 and a year-over-year

increase of 2.7% from Q4 2019

The most active segments ranked by total number of deals were:– Government Services, IT Services and

Software– Defense Electronics– Cybersecurity, Intelligence Services and

Homeland Defense– Machined & Cast Parts

Volume of Deals by Segment(Q4 2020)


Number of Deals by Quarter (last 13 quarters)

4

2838 30 35

5331 36 28 36 27

8 1530

78 6364

74

82

87 7379

7475

6062

83

106101

94

109

135

118109 107 110

102

6877

113

0

20

40

60

80

100

120

140

160

17-4Q 18-2Q 18-4Q 19-2Q 19-4Q 20-2Q 20-4Q

Num

ber

of

Dea

ls

Disclosed Not Disclosed

$36

6

$1

,026

$54

6

$2

38

$1,

278

$54

0

$2,

094

$54

4

$33

1

$39

0

$1

13

$24

8 $58

4

$0

$10

$20

$30

$40

$50

$60

$70

$80

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

$4,500

17-4Q 18-2Q 18-4Q 19-2Q 19-4Q 20-2Q 20-4Q

Tot

al D

iscl

osed

Vol

um

e ($

BN

)

Ave

rag

e D

eal S

ize

($M

)

Average Deal Size Total Disclosed Value

––––––1 1 2 2 2 2 2 2 3 4 4 5 6

11 12 12 13

29

0 6 12 18 24 30 36

Prime Defense Contractors

Navy/Maritime

Electronics Manufacturing (EMS) &…

Connectors

Aircraft Interiors

Aerostructures

Distribution

Controls & Systems

Test & Measurement

Specialty Defense Systems and Services

Sensors & C4ISR

Land Systems

Engines & Engine Systems

Engineering and Project Management

Composites

Unmanned Vehicles

Simulation & Training Systems

Components & Subsystems

Satellite, Satellite Services & Space…

MRO & Logistics

Machined & Cast Parts

Cybersecurity, Intelligence Services and…

Defense Electronics

Government Services, IT Services and…

Number of Deals

----------$20 $24 $39 $45 $75 $78 $115 $136

$660 $1,663 $1,683

$4,016 $4,163

$4,800

$0 $2,000 $4,000 $6,000

Sensors & C4ISR


Navy/Maritime


Electronics Manufacturing (EMS) &…

Distribution

Connectors

Composites

Aircraft Interiors

Aerostructures




Unmanned Vehicles


Controls & Systems

Land Systems

MRO & Logistics

Satellite, Satellite Services & Space…

Defense Electronics

Test & Measurement


Government Services, IT Services and…

Cybersecurity, Intelligence Services and…

Total Disclosed Volume ($M)


Aerospace & Defense

TEV / EBITDA A&D Transaction Multiples by Quarter (last 13 quarters)

Quarterly TEV / EBITDA Transaction Multiples

The average TEV / EBITDA transaction multiple over the last 13 quarters across all A&D transactions was 11.2x

Of the over 1300 deals tracked by Janes Capital Partners over this period, only 82 reported TEV / EBITDA multiples

As expected, multiples vary widely by segment with Cybersecurity, Intelligence Services and Homeland Defense (15.5x), MRO & Logistics (11.3x) and Engineering and Project Management (6.7x) comprising the highest, median and lowest segments

TEV / EBITDA Transaction Multiples by Segment(last 13 quarters)

Note: Excludes TEV / EBITDA transaction multiples over 30.0xSource(s): CapIQ, Dacis, company reports, press releases

5

10.6x

11.9x

8.3x

9.7x

10.4x

8.8x

12.2x

12.8x

11.2x

13.1x

7.6x

10.2x

11.8x

5

8

6

4

7

3

10

8

12

7

1

5

6

0x 4x 8x 12x 16x

17-4Q

18-1Q

18-2Q

18-3Q

18-4Q

19-1Q

19-2Q

19-3Q

19-4Q

20-1Q

20-2Q

20-3Q

20-4Q

TEV / EBITDANumber of Deals with Reported TEV / EBITDA MultiplesN

-

-

-

-

6.7x

6.9x

8.5x

8.7x

9.3x

9.7x

10.0x

10.0x

10.4x

11.2x

11.3x

11.7x

12.0x

12.1x

12.1x

12.2x

13.0x

14.1x

14.6x

15.5x

0

0

0

0

1

8

1

3

7

2

1

3

1

5

6

13

7

2

13

2

1

1

1

4

0x 5x 10x 15x 20x

Unmanned Vehicles

Land Systems

Controls & Systems

Aircraft Interiors



Composites

Electronics Manufacturing (EMS) & Harnessing

Satellite, Satellite Services & Space Systems

Aerostructures

Test & Measurement

Sensors & C4ISR

Navy/Maritime


MRO & Logistics

Government Services, IT Services and Software

Defense Electronics



Distribution



Connectors

Cybersecurity, Intelligence Services and Homeland Defense

TEV / EBITDA Number of Deals with Reported TEV / EBITDA MultiplesN


Aerospace & Defense

LTM LTM EBITDA Market % of TEV / LTM LTM LTM EBITDA Market % of TEV / LTM

($ in millions) Revenue Margin Cap 52-Wk Hi TEV EBITDA ($ in millions) Revenue Margin Cap 52-Wk Hi TEV EBITDA

Aerostructures Machined and Cast Parts

CPI Aerostructures $85 0.7% $46 54.7% $79 NM Howmet Aerospace $12,849 14.8% $12,375 83.3% $16,273 8.6xDucommun 658 12.9% 629 92.9% 920 10.8x ATI 3,342 8.1% 2,127 80.2% 3,216 11.8xFACC 714 NM 476 65.7% 753 NM Barnes Group 1,205 22.0% 2,566 73.9% 3,208 12.1x

Hexcel 1,771 17.9% 4,051 60.2% 4,982 15.7x Lisi 1,666 15.3% 1,312 61.6% 1,582 6.2xKaman 837 16.9% 1,581 84.7% 1,731 12.2x Senior 1,163 9.7% 505 47.5% 800 7.1xLatécoère 645 NM 235 52.3% 402 NM SIFCO 114 10.1% 50 99.4% 91 7.9x

Magellan 609 12.4% 398 60.0% 413 5.5x Median 12.4% 8.3xSpirit AeroSystems 4,488 NM 4,129 52.0% 5,734 NM

Triumph 2,375 10.5% 655 48.0% 2,300 9.2x MROMedian 12.7% 10.8x AAR $1,774 4.9% $1,264 75.5% $1,464 17.0x

Signature Aviation 1,823 21.4% 4,379 95.1% 6,619 17.0x

Commercial Airframes HEICO 1,787 27.2% 16,660 96.0% 17,303 NMAirbus $63,963 NM $86,019 64.4% $91,808 NM MTU Aero Engines 4,910 14.3% 13,846 73.8% 13,173 18.7x

Boeing 60,765 NM 120,843 61.2% 154,954 NM ST Engineering 5,687 13.3% 9,004 86.4% 10,244 13.6xBombardier 14,831 2.5% 993 24.4% 12,709 NM Median 14.3% 17.0xEmbraer 1,260 1.8% 1,255 33.6% 3,808 NM

Textron 11,958 9.5% 11,062 93.8% 13,541 12.0x Defense Electronics, Sensors & C4ISRMedian 2.5% 12.0x AeroVironment $377 12.8% $2,077 87.1% $1,743 NM

Cubic 1,476 12.6% 1,956 88.0% 2,778 14.9x

Components & Subsystems Elbit 4,606 12.9% 5,817 74.8% 6,855 11.6xAmetek $4,646 29.2% $27,824 99.4% $29,493 21.8x FLIR 1,888 23.6% 5,748 73.7% 6,261 14.1x

CIRCOR 808 12.0% 769 82.5% 1,235 12.8x Kongsberg Gruppen 2,908 11.9% 3,696 99.3% 3,434 9.9xCrane 3,048 16.8% 4,513 86.7% 5,258 10.2x Kratos 726 9.4% 3,367 96.1% 3,392 NMMeggitt 2,628 22.2% 4,956 66.5% 6,194 10.6x KVH Industries 157 0.0% 208 95.7% 179 NM

RBC Bearings 666 27.2% 4,390 96.7% 4,274 23.6x L3Harris Technologies 24,036 18.7% 39,715 81.8% 46,166 10.3xTeledyne 3,111 20.8% 14,457 98.2% 14,930 23.1x Mercury Systems 825 19.5% 4,932 91.5% 4,759 NMTimken 3,518 20.4% 5,830 98.5% 7,289 10.1x OSI Systems 1,130 15.1% 1,671 90.8% 1,941 11.4x

TransDigm 5,103 42.2% 33,688 91.9% 49,532 23.0x QinetiQ 1,538 15.8% 2,464 81.1% 2,323 9.5xWoodward 2,496 18.6% 7,631 94.2% 8,391 18.1x Smiths 3,348 16.0% 8,141 84.6% 9,739 18.2x

Median 20.8% 18.1x Thales 20,214 11.6% 19,486 74.9% 24,163 10.3xUltra 1,054 16.5% 2,008 81.6% 2,141 12.3x

Controls & Systems Median 14.0% 11.5x

Astronics $586 8.3% $408 45.4% $572 11.8xCurtiss-Wright 2,379 21.7% 4,829 77.6% 5,594 10.8x Prime Defense ContractorsEaton 18,409 15.7% 48,092 97.1% 56,038 19.4x BAE $23,291 12.1% $21,459 72.7% $25,835 9.2x

Heroux-Devtek 442 14.9% 402 65.2% 566 8.6x General Dynamics 38,217 14.6% 42,609 78.3% 55,931 10.1xHoneywell 33,233 23.7% 149,249 98.2% 157,485 20.0x Huntington Ingalls 9,016 12.4% 6,903 60.9% 8,625 7.7x

ISSC 22 15.4% 112 79.1% 100 NM Leonardo 16,058 11.9% 4,157 49.8% 11,298 5.9xMoog 2,885 11.6% 2,580 82.7% 3,515 10.5x Lockheed Martin 64,244 15.2% 99,318 80.2% 108,441 11.1xParker-Hannifin 13,592 19.4% 35,086 97.2% 42,268 16.0x Northrop Grumman 35,308 13.5% 50,802 79.1% 63,165 13.2x

Median 15.5% 11.8x Raytheon Technologies 83,559 15.5% 107,863 45.1% 134,025 10.4xMedian 13.5% 10.1x


General Electric $77,105 11.0% $94,607 81.4% $157,306 18.5xRolls Royce 17,988 NM 12,691 15.6% 18,255 NM

Safran 24,404 19.8% 60,545 76.1% 64,905 13.5xMedian 15.4% 16.0x

Aerospace & Defense Public Valuations

Note: Trading metrics as of 12.31.20. Valuation multiples based on LTM financial data converted at the historical exchange rate as of each fiscal period end date, and excludes multiples above 25.0x and under 0.0x.Source(s): CapIQ

Public Valuations by A&D Segment

6


Aerospace & Defense

Top 10 Bottom 10

NasdaqGS:R

OLL23.6x NYSE:VEC 5.0x

NYSE:TDY 23.1x TSX:MAL 5.5x

NYSE:TDG 23.0x BIT:LDO 5.9x

NYSE:AME 21.8x ENXTPA:FII 6.2x

TSX:CAE 20.4x LSE:SNR 7.1x

NYSE:MSA 20.2x LSE:SRP 7.4x

NYSE:HON 20.0x NYSE:HII 7.7x

NYSE:ETN 19.4x AMEX:SIF 7.9x

NYSE:BLL 19.1xNasdaqGS:V

SEC7.9x

XTRA:MTX 18.7x LSE:BAB 8.3x

LTM LTM EBITDA Market % of TEV / LTM LTM LTM EBITDA Market % of TEV / LTM

($ in millions) Revenue Margin Cap 52-Wk Hi TEV EBITDA ($ in millions) Revenue Margin Cap 52-Wk Hi TEV EBITDA

Satell ites, Satel lite Services and Space Systems Engineering and Construction

Aerojet Rocketdyne $2,039 14.0% $4,021 92.3% $3,677 12.9x AECOM $13,240 7.9% $7,505 93.6% $8,893 8.5x

Ball Corporation 11,398 17.4% 30,480 90.7% 37,769 19.1x Babcock 5,644 8.9% 1,931 43.1% 4,152 8.3x

Comtech 582 13.6% 517 55.4% 733 9.3x Fluor 13,452 NM 2,247 76.4% 2,033 NM

Gilat Satellite 202 4.0% 362 60.6% 320 NM Jacobs Engineering 13,567 9.1% 14,163 98.0% 15,601 12.6x

Maxar Technologies 1,666 23.4% 2,352 97.6% 4,983 12.8x Median 8.9% 8.5x

ViaSat 2,265 18.8% 2,205 44.1% 4,091 9.6x

Median 15.7% 12.8x Government, IT Services & Software

Booz Allen $7,795 11.4% $12,022 95.6% $13,513 15.2x

Specialty Systems and Services CACI 5,816 12.2% 6,288 86.4% 8,248 11.6x

Axon Enterprise 627 0.4% 7,787 90.9% 7,285 NM CGI Group 9,130 18.6% 20,275 88.2% 22,385 13.2x

CAE 2,369 20.0% 7,818 84.0% 9,653 20.4x ICF 1,469 11.5% 1,402 78.0% 1,936 11.5x

Chemring 521 18.7% 1,100 89.4% 1,162 11.9x KBR 5,753 9.7% 4,408 96.9% 5,054 9.1x

MSA Safety 1,335 22.3% 5,819 96.1% 6,013 20.2x Leidos 11,999 10.9% 14,961 83.5% 19,647 15.0x

SAAB 3,742 7.5% 3,854 69.4% 4,143 14.8x ManTech 2,484 11.0% 3,589 94.6% 3,604 13.2x

Median 18.7% 17.5x MAXIMUS 3,462 14.7% 4,498 90.9% 4,640 9.1x

SAIC 6,879 10.4% 5,510 94.2% 8,262 11.6x

Serco Group 4,451 8.0% 2,004 69.6% 2,632 7.4x

Vectrus 1,405 8.4% 578 83.9% 593 5.0x

VSE 707 12.5% 425 91.7% 701 7.9x

Median 11.2% 11.5x

Market Performance Summary

Aerospace & Defense Public Valuations (continued)

TEV / EBITDA Valuation Trend by Sector(last 5 years)

Performance Dashboard(by TEV / EBITDA Valuation)

Note: Trading metrics as of 12.31.20. Valuation multiples based on LTM financial data converted at the historical exchange rate as of each fiscal period end date, and excludes multiples above 25.0x and under 0.0x.Source(s): CapIQ

Public Valuations by A&D Segment (continued)

11%

11%

11%

7

13.8x

12.3x

10.6x

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

14.0x

16.0x

Dec

-15

Apr

-16

Aug

-16

Dec

-16

Apr

-17

Aug

-17

Dec

-17

Apr

-18

Aug

-18

Dec

-18

Apr

-19

Aug

-19

Dec

-19

Apr

-20

Aug

-20

Dec

-20

TEV

/ E

BIT

DA

Commercial Aerospace Defense Government & IT


Aerospace & Defense

DescriptionHeadquartered in Wilsonville, OR and founded in1978, FLIR Systems designs, manufactures andmarkets advanced sensors and integratedsensor systems that enable the gathering,measurement, and analysis of criticalinformation through a wide variety ofapplications in commercial, industrial,government, and consumer markets worldwide.FLIR’s products seek to improve personal andpublic safety and security, providing advancedintelligence, surveillance, reconnaissance, andtactical defense capabilities, facilitating air,ground, and maritime-based situationaldddddddawareness, enhancing enjoyment of the outdoors, detecting, electrical, mechanical and building envelopeproblems, displaying process, and a variety of other uses of thermal and other sensing technologies. Thecompany operates in three segments: Industrial Business , Government and Defense Business, andCommercial Business. On January 4th, 2021, the Company was acquired by Teledyne Technologies for $8.3B.

FLIR Financial History

Notable A&D Acquisitions

Date Target TEV Description

Dec ‘20 -

Manufacturer of small unmanned aerial systems (sUAS) for defense and public safety customers.

May ’19 $34M

Engineers and manufactures high performance infrared optical assemblies un MWIR, LWIR and SWIR wavebands.

May ’19 $382M

Developer of battle-tested, tactical unmanned ground vehicles for the global military, public safety, and critical infrastructure markets.

Jan ’19 $205M

Canyon Engineering is a designer and manufacturer of precision fluid control solutions for various aircraft systems.

Headquarters Wilsonville, OR

Founded 1978

Employees ~4,265

Acquisitions 23

Market Cap $5,748

Total Debt $219

Revenue $834

EBITDA $431

TEV / EBITDA 17.0x

Price / Earnings 51.5x(1) Market data as of 12.31.20 LTM financial data as of 9.30.20

Sources: CapIQ, Dacis, company presentations and website

Share Price Performance

FLIR Systems Highlights ($M)

Key Management

Buyer Spotlight FLIR Systems, Inc. (NYSE:FLIR)

Transaction Highlight

FLIR Systems Acquires Endeavor RoboticsOn March 3rd, 2019, FLIR completed the acquisition of Endeavor Robotics, adeveloper of battle-tested, tactical unmanned ground vehicles (UGVs) for theglobal military, public safety, and critical infrastructure markets. Thecompany's highly-mobile and easy to operate ground robots utilize advancedsensing and actuation in providing explosive ordnance disposal,reconnaissance, inspection, and hazardous materials support for troops,police, and industrial users. FLIR’s CEO, Jim Cannon, stated: "The acquisitionof Endeavor Robotics, coupled with previous acquisitions of Aeryon Labs andProx Dynamics, has positioned FLIR as a leading unmanned solutions providerand advances the strategy we detailed at our Investor Day last year.”

M&A Strategy

James Cannon President & CEO

Carol Lowe EVP & CFO

Jay Gentzkow Director, Corporate Development

8

Management has sought to grow disproportionatelythrough M&A over the past few years with almosthalf of deployed funds ($629M) going toacquisitions from 2017-2019. Strategic acquisitiontargets are focused on the Company’s key fourstrategic priorities: sensor leadership, unmannedand autonomous, ISR&T, and decision support.

($ in Millions) FY 2016 FY 2017 FY 2018 FY 2019 LTM 9/30Revenue $1,662 $1,800 $1,776 $1,887 $1,888

EBITDA $355 $385 $407 $417 $431

EBITDA Margin 21.4% 21.4% 22.9% 22.1% 22.8%

TEV / LTM Revenue 2.9x 3.6x 3.2x 4.1x 3.3x

TEV / LTM EBITDA 13.5x 17.2x 14.3x 17.6x 14.1x

Cash & ST Investments $361 $519 $512 $285 $320

Deployment of Capital (2017-2019)

*Acquired by Teledyne Technologies (1/4/2021)

Credit Facility &

LTD $157

Other$78

Divestitures$30

Asset Sale $9

Cash From Operations $1,053

Cap Ex.$118

Minority Investments

$27

Acquisitions$629

Share Repurchases

$369

Dividends$262

Source of Funds ($M) Use of Funds ($M)

0

2

4

6

8

10

12

14

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$25

$50

$75

Dec-19 Mar-20 Jun-20 Sep-20 Dec-20

Vol

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Sh

are

Pri

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Trad. Vol. FLIR S&P 500 (rebased)

Note: Fiscal year ends December 31st


Aerospace & Defense

Transaction SummaryOn December 20th, 2020, Lockheed Martin Corporation (NYSE: LMT)entered into a definitive agreement to acquire Aerojet RocketdyneHoldings, Inc. (NYSE: AJRD) for $56 per share in cash, which isexpected to be reduced to $51 per share after the payment of apre-closing special dividend. This represents a post-dividendequity value of $4.6 billion and a total transaction value of $4.4billion, including the assumption of net cash. Aerojet Rocketdynedevelops and manufactures liquid and solid rocket propulsion, air-breathing hypersonic engines, and electric power and propulsionforfor space defense, civil and commercial applications. The company’s primary customers and end usersinclude the DoD (including the US Air Force (USAF), US Army, Missile Defense Agency (MDA), and US Navy),NASA, Boeing, Lockheed Martin, Raytheon Technologies, and United Launch Alliance (ULA). The transaction isexpected to close in the second half of 2021 and is subject to the satisfaction of customary closingconditions, including regulatory approvals and approval by Aerojet Rocketdyne’s stockholders.

Commentary from the CEOsJames Taiclet, Lockheed Martin president and CEO, stated: "Acquiring Aerojet Rocketdyne will preserve andstrengthen an essential component of the domestic defense industrial base and reduce costs for ourcustomers and the American taxpayer. This transaction enhances Lockheed Martin's support of critical U.S.and allied security missions and retains national leadership in space and hypersonic technology. We lookforward to welcoming their talented team and expanding Lockheed Martin's position as the leading providerof 21st century warfare solutions.“ Eileen P. Drake, CEO and President of Aerojet Rocketdyne, stated: "Weare pleased to bring together our complementary companies in a transformative transaction that willprovide premium cash value for our shareholders and tremendous benefits for our employees, customersand partners. Joining Lockheed Martin is a testament to the world-class organization and team we've builtand represents a natural next phase of our evolution. As part of Lockheed Martin, we will bring ouradvanced technologies together with their substantial expertise and resources to accelerate our sharedpurpose: enabling the defense of our nation and space exploration. On behalf of the Aerojet RocketdyneBoard and management team, I'd like to thank all of our employees for their unwavering dedication andfocus in helping us achieve this great milestone."

Deal Spotlight

Headquarters El Segundo, CA

Employees 4,814

LTM 9/30/20 Revenue $2.0 billion

LTM 9/30/20 EBITDA $270 million

CEO & President Eileen P. Drake

Lockheed Martin Acquires Aerojet Rocketdyne

Aerojet Rocketdyne Overview

Structure All-Cash

Total Enterprise Value $4.4 billion

Revenue Multiple 2.0x

EBITDA Multiple 14.1x

Announced Date December 20, 2020

Status Pending

Price per Share$56.00 (includes a $5.00

pre-closing dividend)

Deal Summary ($M)

Aerojet Rocketdyne Key Figures ($M)

Strategic Rationale for Acquisition

9

Sources: CapIQ, Dacis, company presentations and website

Select Programs Revenue By End Customer

Aerojet Rocketdyne at a Glance

Note: Revenue percentages as of September 30, 2020

Expansion of New Customer Relationships and Innovative Technologies

35%

21%15%

29%

Complementary Portfolios to Drive Long-Term Growth

Strengthening Core Capabilities

Shared Culture of Innovation

Other

Date $ Value Description

Sep 20 N/A

GBSD Program ($13B) - Develop a large solid rocket motor and the post-boost

propulsion system for Northrop Grumman

Aug 20 N/A

NSSL Phase 2 Launch Services ($3.3B) -Provide RL10 rocket engines for ULA’s Vulcan Centaur launch vehicle for the

joint IDIQ contract awarded to ULA and SpaceX

May 20 $1.8BProduction of 18 RS-25 rocket engines

for NASA’s Artemis missions

Mar 20 $1.0BStandard Missile propulsion systems for

Raytheon Technologies

Aerojet Rocketdyne Recent Contract Awards

RS-25 Engines

THAAD

PAC-3

Standard Missile

RS-25 Engines

GBSD

Space Launch System

Advanced Programs

Space and Launch Systems

Missile Defense and Strategic Systems

Tactical Systems

In-space Propulsion


Aerospace & Defense

DescriptionThe MQ-25 Stingray is an aerial refueling drone developed out of the Carrier-Based Aerial-Refueling System(CBARS) program which grew from the earlier Unmanned Carrier-Launched Airborne Surveillance and StrikeProgram. Boeing revealed the prototype aircraft incorporating lessons learned from the Boeing PhantomRay flying wing and its other unmanned aerial systems. Much of the aircraft features have yet to bedisclosed as the program continues development. Currently, the MQ-25 design is powered by one Rolls-Royce AE 3007N turbofan engine delivering 10,000 lb. of thrust and is a variant of the engine used to powerthe Navy's MQ-4C Triton. The aircraft is less stealthy than flying wing UAVs; however, it does feature astealthy fuselage shaping and flush inlet to shield engine blades from radar and incorporates a V-tail.

Platform Overview

Type Aerial Refueling Drone

Manufacturer The Boeing Company

First Flight September 19th 2019

Max Air Speed Currently Classified

Max Fuel Load 15,000 lb.

Minimum Range 500 Miles

Engines Rolls-Royce AE 3007N

Thrust 10,000 lb.

Carrier Based Test Start of 2022

Boeing MQ-25 Stingray Program Overview

HistoryThe United States began efforts to develop an unmanned carrier based aircraft in 2006. Originally, theconcept was focused on a stealthy strike platform with capabilities of penetrating enemy air defenses. In2012, the lethality and strike requirements were scrapped for a ISR (UCLASS) oriented aircraft for quickerdevelopment and a focus on low-intensity counter terrorism type missions. On February 1st, 2015, aftermany delays of the UCLASS ISR focused program, it was reported that a significant effort would now be puttowards developing a “Super Hornet-Sized” carrier based aerial refuel known as CBARS with a small amountof capabilities remaining in ISR type missions. After further competition, and officially naming the programthe MQ-25 Stingray (originally RAQ-25), an RFP was issued by the Navy in late 2016. Boeing was laterawarded the program in August 2018, beating Lockheed Martin and General Atomics.

Sources: Boeing, AirforceTimes, Military Factory, Military.com

Recent Milestones

Carrier Based Aircraft Expected to Serve

MQ-25 Overview

MQ-25 Design and Features

Year News Release

2017Boeing Shares Sneak Peek of Aerial Refueler for MQ-25

2018U.S. Navy Awards Boeing $805 million MQ-25 Contract

2019Boeing MQ-25 Unmanned Aerial Refueler Completes First Test Flight

2020Boeing Awarded U.S. Navy Contract Modification for Additional MQ-25 Aircraft

2020Boeing’s MQ-25 Completes First Test Flight with Aerial Refueling Store

F/A-18 EA-18G Growler

F-35C

Key Suppliers

Cobham Refueling Pods Foldable Wing TipsCarrier Launch Compatible Gear

Stealthy Fuselage Rolls Royce Turbofan AE3007N EngineEO/IR Sensors

1010

Platform OutlookThe outlook and success for MQ-25 is dependent on the platforms development time. There are current plansfor operational capability by 2024; however, critics remain skeptical that the program will achieve its tightdevelopment windows. The key to hitting milestones revolves around the drone getting its test ships throughthe required modernizations on time. Two carriers, the Carl Vinson and George H.W. Bush, have limitedwindows to complete the installation of unmanned aircraft control stations. If the Navy misses its plannedinstallation windows, the program could extend development testing by 3 years with possible cost increases.With a successful development, Boeing stands to benefit from the program. The U.S. Navy could deployanywhere from 4 to 12 UCAVS on each of its aircraft carriers with a total possible procurement as high as156. A medium procurement objective could be 56 (four per carrier) to 84 (six per carrier) air vehicles.


Aerospace & Defense


All Transactions – Value Disclosed


11

Note: Deals shown only include transactions with disclosed multiples

Valuation Metrics

Announced Date

Target AcquirorImplied TEV

($M)TEV/

RevenueTEV/

EBITDASegment Deal Type(s)

PR

PR I

PR

PU I

PR

PU PB

PR PB I

PS

PR

PR

PR I

PR

PU

PS

PS I

PU I

PS I

PU I12/03/20 OptaSense Holdings Limited Luna Innovations Incorporated $39.1 na naSpecialty Defense Systems

and Services

11/25/20 TRU Simulation + Training Canada Inc. CAE Inc. $40.0 na naSimulation & Training

Systems

11/30/20 PA Consulting Group Limited Jacobs Engineering Group Inc. $2,394.8 3.3x 15.2xGovernment Services, IT

Services and Software

11/16/20 METIS Solutions, LLC PAE Incorporated $92.0 na 9.7xCybersecurity, Intelligence

Services and Homeland

Defense

11/24/20 Cobham Aero Connectivity TransDigm Group Incorporated $965.0 4.3x na Defense Electronics

11/11/20 Expanse, Inc. Palo Alto Networks, Inc. $800.0 na naGovernment Services, IT


11/13/20 Mikros Systems Corporation McKean Defense Group, LLC $3.2 0.5x na Defense Electronics

naSatellite, Satellite Services &

Space Systems

11/02/20 New Ridge Technologies, LLC Luna Innovations Incorporated $0.6 na

na Defense Electronics

na Test & Measurement

11/10/20 Blue Canyon Technologies, Inc. Raytheon Technologies Corporation $350.0 na

11/10/20 Relec Electronics Limited Gresham Worldwide, Inc. $4.7 0.7x

10/28/20 Aries Alliance Ace Capital Partners $23.5 na na Machined & Cast Parts

10/29/20 Braxton Science & Technology Group, LLC Parsons Government Services, Inc. $300.0 na naSatellite, Satellite Services &

Space Systems

10/26/20 Analytical Graphics, Inc. ANSYS, Inc. $700.0 na naGovernment Services, IT


10/26/20 Forcepoint LLC Francisco Partners Management, L.P. $1,100.0 1.7x naCybersecurity, Intelligence

Services and Homeland Defense

10/26/20 CENTRA Technology, Inc. Pacific Architects and Engineers, LLC $208.0 na naCybersecurity, Intelligence

Services and Homeland Defense

10/26/20Aviation Partnership (Philippines)

CorporationCebu Air, Inc. $11.0 na na MRO & Logistics

10/01/20 Burton Associates, LLC (IBA) DLH Holdings Corp. $32.0 1.3x naGovernment Services, IT


10/15/20 SpaceQuest Ltd. AAC Clyde Space AB (publ) $10.3 na naSatellite, Satellite Services &

Space Systems


Aerospace & Defense


All Transactions – Value Disclosed (Continued)


12

Note: Deals shown only include transactions with disclosed multiples

Valuation Metrics

Announced Date

Target AcquirorImplied TEV

($M)TEV/

RevenueTEV/

EBITDASegment Deal Type(s)

PR

PU PB

PR I

PU

PR

PU

PS

PR

PU I

PR I

PS I

PR

12/07/20 Physical Optics Corporation, Inc. Mercury Systems, Inc. $310.0 2.6x 13.0x Defense Electronics

12/07/20Federal IT and Mission Support Services

Business of Northrop Grumman

Corporation

Peraton Corporation $3,400.0 1.5x naCybersecurity, Intelligence

Services and Homeland

Defense

12/08/20 Telerob GmbH AeroVironment, Inc. $45.4 na na Unmanned Vehicles

12/09/20 MTS Systems Corporation Amphenol Corporation $1,682.5 2.0x 10.0x Test & Measurement

12/15/20Pratt & Miller Engineering and Fabrication,

Inc.Oshkosh Corporation $115.0 na na Land Systems

12/20/20 Aerojet Rocketdyne Holdings, Inc. Lockheed Martin Corporation $4,016.1 2.0x 14.1x Engines & Engine Systems

12/21/20 Genesys Aerosystems Group, Inc. Moog Inc. $77.7 na na Controls & Systems

12/21/20 RigNet, Inc. Viasat, Inc. $235.7 1.0x 8.6xGovernment Services, IT


12/22/20 Racal Acoustics Ltd Invisio AB (publ) $20.4 na na Components & Subsystems

12/22/20 Merlot Aero Ltd CAE Inc. $35.0 na naSimulation & Training

Systems

12/23/20 Sparton Corporation Elbit Systems of America, LLC $380.0 na na Defense Electronics

12/28/20 Zenetex, LLC Vectrus Systems Corporation $125.0 na na MRO & Logistics


Aerospace & Defense

All Transactions – Value Not Disclosed



13

Announced Date Target Acquiror Segment Deal Type(s)

PR

PR I

PR PB

PR

PR PB I

PR PB

PR

PR PB

PR PB

PR

PR

PR

PR PB

PR PB

PR I

PR PB

PR I

PR PB I

MRO & Logistics

10/20/20 SOCIETE AHE Inc. Aircraft Fasteners International, LLC Distribution

10/16/20 Business of RUAG International in Oberpfaffenhofen General Atomics Europe Gmbh

Unmanned Vehicles

10/16/20 GovernmentCIO LLC Welsh, Carson, Anderson & StoweGovernment Services, IT Services and

Software

10/15/20 Business assets of Ballard Unmanned Systems Honeywell International Inc.

10/12/20 Applied Resources, Inc. ARCH Global Precision LLC Machined & Cast Parts

10/12/20 Seanair Machine Company, Inc. AE Industrial Partners, LP Machined & Cast Parts

Rocky Research Honeywell Aerospace Inc.


10/07/20 TRI-COR Industries, Inc. Xenith Solutions LLCGovernment Services, IT Services and

Software

10/06/20 Delva Tool & Machine Corp Consolidated Machine & Tool Holdings, LLC

Sensors & C4ISR

10/02/20 Tekron International Limited Microchip Technology Incorporated Defense Electronics

10/01/20 Skyris LLC ECS Federal, LLC

AEVEX Aerospace, LLC

IMG Companies, LLC Machined & Cast Parts

10/06/20

Larkin Precision Machining, Inc.

MRO & Logistics

10/05/20 CAMRIS International, LLCThe Henry M Jackson Foundation For The Advancement Of Military Medicine Inc

Government Services, IT Services and Software

10/05/20 IKHANA Group LLC

Defense Electronics

10/09/20 i3 Hypersonics Portfolio

Armor Defense Inc. Telecom Brokerage Inc.

Composites

10/06/20

California Screw Products Corporation Avantus Aerospace Group Limited

Cybersecurity, Intelligence Services and

Homeland Defense

10/06/20 Shooting Range Industries, LLC (SRI) Arotech Corp.Specialty Defense Systems and

Services

10/06/20

Lockheed Martin CorporationGovernment Services, IT Services and

Software

10/07/20


Aerospace & Defense

All Transactions – Value Not Disclosed (continued)



14


PR PB

PR

PR PB

PR PB

PR PB

PR

PR PB

PR PB

PR PB

PR PB I

PR I

PR PB

PR PB

PR

PR I

PR PB I

PR PB

PR PB

Government Services, IT Services and

Software

11/04/20 Linkware, LLC / PRE, LLC AE Industrial Partners, LPGovernment Services, IT Services and

Software

11/03/20 Executive Information Systems, LLC CCP Capital Strategies, LLC


11/03/20 Aerotech Pro SAS Sabena technics S.A. MRO & Logistics

11/02/20 Cadence Consultancy Ltd Calian Group Ltd.

Cybersecurity, Intelligence Services and Homeland Defense

11/02/20 Butterfield Engineering, LLC CertTech, L.L.C. Engineering and Project Management

11/02/20 TELESIS Corporation Belcan, LLC

Defense Electronics

11/02/20 Aurotech, Inc. OpenGate Capital, LLCGovernment Services, IT Services and

Software

11/01/20 DRI Relays Inc. TE Connectivity Ltd.

Defense Electronics

10/30/20 CSDC Systems Inc. Granicus, Inc.Government Services, IT Services and

Software

10/29/20 Sensor Concepts Inc. Raptor Scientific LLC

Satellite, Satellite Services & Space

Systems

10/29/20 Hill Technical Solutions, Inc. DC Capital Partners, LLC Engineering and Project Management

10/29/20 Roccor, Inc. RedWire, LLC


10/28/20 Business of Guidestar Optical Systems, Inc. General Atomics Electromagnetic Systems Inc. Sensors & C4ISR

10/27/20 Cascade Engineering Technologies, Inc. Goff Capital, Inc.

Cybersecurity, Intelligence Services and

Homeland Defense

10/26/20 PRL, Inc. Compass Partners Capital LLC Machined & Cast Parts

10/26/20 PCI, LLC AE Industrial Partners, LP


Software

10/20/20 STADCO, Inc. TechPrecision Corporation Machined & Cast Parts

10/20/20 TSG Solutions, Inc. Continental Mapping Consultants, Inc.


Aerospace & Defense




15


PR PB

PR PB

PR

PR I

PR I

PR

PR

PR

PU PB

PR PB I

PR

PR

PR PB

PR PB

PR

PR I

PU PB I

PR

11/18/20 EFIX Aviation Support Precision Aviation Group, Inc. MRO & Logistics

11/24/20 The Buffalo Group, LLC Jacobs Engineering Group Inc.Cybersecurity, Intelligence Services and

Homeland Defense

11/20/20 5-D Systems, Inc. Kratos Defense & Security Solutions, Inc.Government Services, IT Services and

Software


Software

11/19/20 Jet Support Services, Inc. GTCR LLC MRO & Logistics

11/22/20Manufacturing Rights of Four Aircraft Instruments

from Flightline Electronics IncOntic Engineering and Manufacturing, Inc. Components & Subsystems

11/19/20 Evans Capacitor Company, LLC Arcline Investment Management LP Defense Electronics

11/20/20 ELVOPlasan Sasa Ltd & SK Group (Naska Industries

Ltd.)Land Systems

11/19/20 The Launch Company, LLC Voyager Space Holdings, Inc.Satellite, Satellite Services & Space

Systems

11/19/20 G2SF, INC. Gunnison Consulting Group Inc

11/17/20 Aerol Co., Inc. Caster Concepts, Inc. Machined & Cast Parts

11/18/20 AVISTA Incorporated Belcan, LLCGovernment Services, IT Services and

Software


Software

11/16/20 Flight Simulation Company B.V. CAE Inc. Simulation & Training Systems

11/17/20 Impossible Aerospace Corp Alpine 4 Technologies, Ltd. Defense Electronics

11/05/20 Spear Research, LLC Pacific DefenseGovernment Services, IT Services and

Software

11/12/20 MissionTech Solutions, LLC AvantusGovernment Services, IT Services and

Software

11/12/20 Minerva Engineering, LLC ManTech International CorporationCybersecurity, Intelligence Services and

Homeland Defense

11/13/20 Toll Aviation Engineering Pty Ltd Alliance Aviation Services Limited MRO & Logistics

11/17/20 Kimetrica LLC American Institutes For Research


Aerospace & Defense




16


PR

PR

PR

PR

PR PB

PR PB

PU I

PR

PR PB

PR PB

PR

PR PB

PR

PR PB

PR PB

PR PB

PR PB I

PR PB I

12/01/20 Titania Solutions Group, Inc. Swish Data Corporation.Government Services, IT Services and

Software

12/02/20 Altavian, Inc. FLIR Systems, Inc. Unmanned Vehicles

12/01/20 Integrated Solutions Management, Inc. ECS Federal, LLCGovernment Services, IT Services and

Software

12/01/20 Assets of Aurora Bearing Company The Timken Company Components & Subsystems

12/03/20 BigBear, Inc. NuWave Solutions, LLCGovernment Services, IT Services and

Software

12/04/20 Raydon Corporation By Light Professional IT Services, Inc.Government Services, IT Services and

Software

12/07/20Civil Nuclear Instrumentation and Control business of

Rolls-Royce Holdings PLCFramatome Engines & Engine Systems

12/07/20 Response Technologies, LLC Bell Textron Inc. Composites

12/09/20 CodeMettle, LLC J.F. Lehman and Company, LLCGovernment Services, IT Services and

Software

12/10/20 Syntonics LLC Ironwave Technologies LLC Defense Electronics

12/14/20 Tapestry Technologies, Inc. ManTech International CorporationCybersecurity, Intelligence Services and

Homeland Defense

12/14/20 Comply365, LLC Liberty Hall Capital Partners, L.P.Government Services, IT Services and

Software

12/14/20 Ski Systems, Inc. Intelligent Waves LLCCybersecurity, Intelligence Services and

Homeland Defense

12/15/20 Advanced Composite Products and Technology, Inc. Charger Investment Partners LP Composites

12/15/20 Loadpath, LLC RedWire, LLCSatellite, Satellite Services & Space

Systems

12/18/20 Shields Manufacturing, Inc. Precinmac Precision Machining Machined & Cast Parts

12/15/20 Sevatec, Inc. Octo Consulting Group, Inc.Government Services, IT Services and

Software

12/18/20 Viper Northwest, Inc. Precinmac Precision Machining Machined & Cast Parts


Aerospace & Defense




17


PR PB

PR

PR PB

PR

PR PB

PR PB

PR PB

PR PB

PR

PS PB

PR

12/21/20 Base2 LLC/Fortego, LLC BlueHaloCybersecurity, Intelligence Services and

Homeland Defense

12/21/20 Gryphon Group Security Solutions LLC Raven Advisory LLCGovernment Services, IT Services and

Software

12/21/20 ProModel Corporation NuWave Solutions, LLCGovernment Services, IT Services and

Software

12/21/20 CommTech Corp. (ACT-Corp) Valkyrie Enterprises, Inc. MRO & Logistics

12/22/20 AeroSpares, Inc. Jet Parts Engineering, LLC Components & Subsystems

12/22/20 Mapson Engineering, Inc. Lockwood Industries, Inc. Defense Electronics

12/22/20 Mingo Aerospace, LLC Company Sunvair Aerospace Group, Inc. MRO & Logistics

12/23/20H.&S. Swansons' Tool Company (nka:H&S SWANSON

Family Holdings Inc.)ARCH Global Precision LLC Machined & Cast Parts

12/28/20 Vayu, Inc Alpine 4 Technologies, Ltd. Unmanned Vehicles

12/28/20 CTS Engines, LLC J.F. Lehman and Company, LLC MRO & Logistics

12/30/20 Sensor Scientific Inc. CTS Corporation Components & Subsystems

Quarterly Report - Janes Capital · 2021. 1. 26. · Engines & Engine Systems Connectors...

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Transcript of Quarterly Report - Janes Capital · 2021. 1. 26. · Engines & Engine Systems Connectors...