Disclosures

API Technologies Corp.

I, Mike Crawford , certify that this report reflects my personal beliefs about this company and that no portion of my compensation was, is or will be directly or indirectly related to the specific recommendations or views discussed in this report.

Disclosure

  • B. Riley & Co., LLC, or any of its affiliates, does and seeks to do business with companies covered in its research reports.
  • A portion of this analyst’s compensation is based on the sales, trading and investment banking activities of B. Riley & Co., LLC.
  • This analyst, or a member of this analyst's household who is financially dependent on this analyst or vice versa, holds a long stock position in the security covered in this report.
  • This report may be distributed by FBR Capital Markets & Co., an affiliate of B. Riley & Co., LLC and as such constitutes third party research. For additional information, please visit http://www.fbr.com/disclosures.
Disclosure Chart

Ratings Distribution as of August 21, 2017
Rating Number of Companies Percent of Total
Buy 145 74.4%
Neutral 49 25.1%
Sell 1 0.5%
Total 195 100%
% with Investment Banking Relationships
Rating Number of Companies Percent of Total
Buy 23 88.5%
Neutral 3 11.5%
Sell 0 0.0%
Total 26 100%

Explanation of B. Riley & Co. LLC's Rating System

  • Buy: We generally expect “Buy” rated stocks to have an above-average risk-adjusted total return over the next 12 months. We recommend that investors buy the securities at the current valuation.
  • Neutral: We generally believe “Neutral” rated stocks will have an average risk-adjusted total return over the next 12 months.
  • Sell: We generally expect “Sell” rated stocks to have a below-average risk-adjusted total return over the next 12 months. We recommend that investors reduce their positions until the valuation or fundamentals become more compelling.

Risks and Considerations

  • Acquisition/Integration - The Company recently completed acquisition(s). If the Company fails to successfully integrate the acquisition, the deal may lead to disappointing returns.
  • Government Funding - Historically, the Company has generated significant revenues from various departments of the U.S. Government. Should funding to these departments be reduced, programs in which the Company participates in may be scaled down or cut, thereby hurting the Company's financial results.
  • General Industry - The Company could miss our estimates and/or their financial guidance.

Additional Risks and Considerations

     

     

    • Performance Qualifications - To compete effectively on a decreasing number of increasing-size contract vehicles, ATNY must be able to show it has the prior performance qualifications (quals) to be viable. Companies that can not adapt to the current competitive environment will slip in relevance and see contract backlogs begin to erode. ATNY needs to demonstrate a strong track record on its current contracts not only to win recompetes on its existing business but also to demonstrate if possesses the necessary skills to compete on new business development initiatives coming up for bid.
      • Recompetes - The nature of the defense IT beast is for contract vehicles to last three to five years, with a three to five year option at the tail end. The flip side to the cycle is that every year, incumbent service providers must recompete to retain a portion of their existing business. While the past rule of thumb has been that a contractor would have to have really messed something up not to keep the business on the recompete, there remains pressure to perform, and each new RFP must be treated as a competitive process.
      • New Administration - Potential defense budget cuts under the Obama administration could hurt businesses supporting the DoD. Most at risk, we believe, are big ticket platforms susceptible to cost overruns—such as Future Combat Systems and space-based missile defense.
      • See the Company's SEC filings, particularly its 10-K filing, for a discussion of further potential risks.