It was a busy year for both your Board and Executive team. The Board has overseen the continuation of a dynamic, multi-faceted strategic plan which is centered on profitable growth while expanding the markets where we have traditionally done business. At the same time, the company acted with discipline when external events disrupted its progress. We watched closely as U.S. budget sequestration began to impact the company’s facilities in California. When it became apparent that there would not be a resumption of government communication satellite projects for some time we supported the executive team in the difficult but necessary decision to close our U.S. facility. This disciplined approach taken by management minimized the impact on other parts of our business. As well, by ensuring the intellectual property transfer to Canada, the company maintains its ability to serve the U.S. government market when orders eventually resume. The executive team also successfully managed business disruption resulting from other global political upheavals.

We are pleased with the continuing evolution of exactEarth^TM. The delay of the M3M satellite launch was resolved by adding three in-orbit satellites to the exactEarth constellation, which improved data capture, and secured a new launch contract with M3M. This both met the immediate needs of the customer base but also prepared the company for enhanced service provision in the future. As the satellite industry is global and thus subject to the impact of government decisions and geopolitical trends, the ability to successfully navigate through these events is critical and our team performs very well.

Moving into 2015, the Board will continue to work with the executive team to capitalize on the opportunities that we make for ourselves. The company is poised for real growth which will generate shareholder value both in the medium and long term. It is shareholder value that continually is considered by your Board as we move into the future. We plan to maintain the quarterly dividend of three cents per share that we began last year.

Thank you on behalf of our entire Board for you interest in our company. Thank you to a dedicated executive team and all employees and stakeholders of COM DEV.

 

In fiscal 2014 COM DEV International had strong results in its Products and Systems divisions, which met or exceeded all targets for the year. exactEarth, our data services subsidiary, also had exceptional results with a 33 percent increase in revenue. Subsequent to year-end, we further bolstered our performance in our United Kingdom operations with the completion of a strategic acquisition in Scotland that adds capacity and expands our product offering. There were also, however, challenges that required us to make difficult decisions in response to market conditions in the U.S.

In the Commercial segment of our business, we continued to benefit from the growing global demand for data that is driving the expansion of satellite programs. This is reflected in the almost 27 percent growth in revenue we received in our commercial satellite components business. On a consolidated basis, new orders were lower, at $201 million, than the record-setting $243 million in 2013. However, order flow grew each quarter with almost $93 million received in the fourth quarter. This was almost six percent higher than the fourth quarter of fiscal 2013 and reflects a momentum in new orders that we believe will continue in fiscal 2015.

At our facility in Aylesbury, England, government support for the space industry in the United Kingdom and Europe drove growth in 2014. We are involved in several contracts through the European Space Agency and expect the pace of work we are receiving to continue. With about 100 employees at Aylesbury, our U.K. division has grown into a key contributor to the Company but was also strained to expand much further. Late last year we saw an opportunity to increase our share in the European market and expand capacity with the acquisition of MESL Microwave in Edinburgh, Scotland. MESL is a supplier of ferrite components for radar communications, defence and space applications. With MESL we are now the leading provider of space ferrite devices and subsystems in Europe, a segment of the market that is expected to grow by over 25 percent on a compound annual rate over the next five years.

In 2014, exactEarth came into its own as a thriving business that is meeting the vision we had for it when it was founded in 2009. It added three in-orbit satellites to its constellation and expanded its ground stations from six to 13. It has also entered into a public/private partnership with the European Space Agency that designated exactEarth as the satellite AIS service provider for the European institutional market. And possibly the most significant event in 2014 for exactEarth was the contract signed with the Government of Canada last September worth over $17 million. This will provide exactEarth services to all departments of the government, enabling a wide range of applications including but not limited to wide-area maritime surveillance and security, customs and border protection, Arctic vessel traffic monitoring, fisheries and environment monitoring as well as Search and Rescue.

As we mentioned last year, the ongoing budget sequestration in the United States has resulted in a significant decline in our U.S. operation, as we have not seen a major U.S. government communications satellite awarded among our customers since November 2012. After an extensive review, we decided to close our operations at El Segundo, California effective March of 2015. This was a difficult decision, but was based on our view that the decline in U.S. government business will go on for several more years. On behalf of COM DEV International, I would like to thank our employees at El Segundo for their dedication and consistent excellent work in the face of some serious market headwinds.

LOOKING AHEAD

In 2015, and for the foreseeable future, the commercial satellite market remains robust. We expect that the flow in new orders, along with our strong commercial communication satellite backlog and the growth we’ve seen in our U.K. business, will offset the revenue decline we are experiencing from the U.S. government communications satellite business. MESL, our recent acquisition, is expected to contribute over $10 million in revenue in 2015 as well as accelerate the growth in our U.K. business.

exactEarth will continue to grow on several fronts in 2015. The previously delayed M3M satellite, along with two further satellites, are scheduled to be launched in 2015. This will complete its planned satellite constellation which, combined with the additional ground stations, will enhance the quality of the data it captures. This data set provides tremendous opportunity to create value-added information services, such as its ShipView platform launched in 2014. Initial orders are also expected in 2015 for the small vessel tracking solutions that were created in partnership with SRT, a world leader in AIS transponders. They are targeting a global deployment of one million units by 2020.

Acquisitions will also continue to be a focus in 2015. We will look for opportunities similar to our recent acquisition of MESL which expand our current offering, enhance our geographic presence and are near-term revenue positive.

As we approach the many opportunities available to us in fiscal 2015, we will maintain the financial discipline that has guided us over the past several years. Your management team recognizes that it is important to grow, while continuing to deliver value to our shareholders. For the positive results we achieved in 2014, I thank our employees. I also thank our customers and shareholders for their ongoing support and hope to enjoy continued mutual success.