The KEYW Holding Corporation (Nasdaq:KEYW) announces full year
revenue for 2013 of $298.7 million versus full year revenue for
2012 of $243.5 million, an increase of 23%. Net loss for 2013 was
$10.6 million versus net income of $1.0 million in 2012. Net loss
for 2013 included a one-time $4.8 million after tax litigation
settlement charge. Fully diluted GAAP loss per share in 2013 was
$0.29. Excluding the litigation settlement charge, our loss per
share would have been $0.16 for 2013 as compared to fully diluted
GAAP earnings per share of $0.03 in 2012. Amortization associated
with acquisition related intangibles further reduced 2013 earnings
per share by $0.40. Adjusted EBITDA (as described below) for 2013
was $27.2 million, or 9.1% of 2013 revenue.
For the fourth quarter of 2013, revenue was $68.8 million and
fully diluted loss per share was $0.01. Fourth quarter adjusted
EBITDA was $7.0 million in the fourth quarter of 2013, or 10.2% of
revenue, versus $10.4 million in the fourth quarter of 2012, or 14%
of revenue. During the fourth quarter, KEYW received $110 million
in funding actions and ended the year with 1,068 employees.
By reporting segment, KEYW's Government segment generated $38.3
million in adjusted EBITDA during the full year 2013, or 13.2% of
Government revenue, versus $32.2 million in the full year 2012, or
13.4% of revenue. Adjusted EBITDA was a loss of $11.1 million in
KEYW's Commercial Cyber Solutions segment in the full year 2013
versus positive adjusted EBITDA of $0.7 million in the full year
2012. For the fourth quarter of 2013, KEYW's Government segment
generated $11.0 million in adjusted EBITDA, or 16.8% of Government
revenue, versus $9.7 million in the fourth quarter 2012, or 13.6%
of Government revenue. Adjusted EBITDA was a loss of $4.0 million
in KEYW's Commercial Cyber Solutions segment in the fourth quarter
of 2013 versus positive adjusted EBITDA of $0.7 in the fourth
quarter 2012.
"KEYW made significant progress in 2013 with the official launch
of Hexis Cyber Solutions, Inc. and commercial release of the
HawkEye G product in the fourth quarter of 2013. We are converting
our beta customers into commercial customers and have built a
substantial pipeline of near-term customers. We made a
significant investment in commercial infrastructure in 2013 thus
impacting EBITDA." commented Len Moodispaw, CEO and President of
KEYW Corporation. "In the Government business, KEYW was
awarded several new large contract vehicles in 2013, but there is
no doubt the impacts of sequestration and the government shutdown
took a toll on the company. Our government customers now have a
budget in place that addresses sequestration and we expect to begin
seeing a return to a more normal environment in 2014."
As mentioned, revenue for the fourth quarter of 2013 was $68.8
million, a decrease of 7% versus the fourth quarter of
2012. The decrease was driven by the impact of sequestration
and the fourth quarter 2013 government shutdown. Fully
diluted GAAP loss per share in the fourth quarter of 2013 was
$0.01. Amortization of acquisition related intangibles reduced
fourth quarter earnings per share by approximately $0.09 per
share.
In the fourth quarter of 2013, management evaluated KEYW's
segment disclosure as a result of the increasing importance of our
commercial cybersecurity group and the changing mix of our
government contracting business. Based on this evaluation, we
are changing our reporting segments from the previously identified
Services and Integrated Solutions segments to Government and
Commercial Cyber Solutions segments. The Commercial Cyber Solutions
group had been part of Integrated Solutions, beginning with the
acquisition of Sensage, Inc. in the fourth quarter of 2012.
Adjusted EBITDA, as defined by KEYW, is a non-GAAP measure that
is calculated as GAAP net income plus other non-recurring expense,
interest expense, income taxes, stock compensation, depreciation,
and amortization. We have provided Adjusted EBITDA because we use
the measurement internally to evaluate performance and we believe
it is a commonly used measure of financial performance in
comparable companies. It is provided to help investors
evaluate companies on a consistent basis, as well as to enhance an
understanding of our operating results. In addition, our board
of directors and management use Adjusted EBITDA:
- As a measure of operating performance;
- To determine a significant portion of management's incentive
compensation;
- For planning purposes, including the preparation of our annual
operating budget; and
- To evaluate the effectiveness of our business strategies.
Adjusted EBITDA is not a recognized term under U.S. GAAP and
does not purport to be an alternative to net income as a measure of
operating performance or the cash flows from operating activities
as a measure of liquidity. Please refer to the table below that
reconciles GAAP net income to Adjusted EBITDA.
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Three |
Three |
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|
|
months |
months |
|
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ended |
ended |
Year ended |
Year ended |
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December |
December |
December |
December |
|
31,
2013 |
31,
2012 |
31,
2013 |
31,
2012 |
|
(Unaudited and in
thousands) |
Net (Loss) Income |
$(510) |
$180 |
$(10,634) |
$1,015 |
|
|
|
|
|
Depreciation |
1,698 |
1,229 |
6,009 |
4,369 |
|
|
|
|
|
Intangible Amortization |
5,663 |
6,804 |
24,658 |
21,411 |
|
|
|
|
|
Public Offering, Acquisition and Other
Nonrecurring (Benefits) Costs |
(164) |
552 |
6,913 |
938 |
|
|
|
|
|
Stock Compensation Amortization |
1,418 |
956 |
5,731 |
3,024 |
|
|
|
|
|
Interest Expense |
832 |
1,017 |
3,508 |
2,307 |
|
|
|
|
|
Tax Benefit |
(1,925) |
(338) |
(9,005) |
(86) |
|
|
|
|
|
Adjusted EBITDA |
$7,012 |
$10,400 |
$27,180 |
$32,978 |
|
|
|
|
|
|
THE KEYW HOLDING
CORPORATION AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS
OF OPERATIONS |
(In thousands, except
share and per share amounts) |
|
|
|
|
|
|
Three months |
Three months |
|
|
|
ended |
ended |
Year ended |
Year ended |
|
December 31, |
December 31, |
December 31, |
December 31, |
|
2013 |
2012 |
2013 |
2012 |
|
(Unaudited) |
|
|
Revenues |
|
|
|
|
Government Solutions |
$65,482 |
$70,962 |
$288,909 |
$240,245 |
Commercial Cyber Solutions |
3,346 |
3,275 |
9,823 |
3,275 |
Total |
68,828 |
74,237 |
298,732 |
243,520 |
|
|
|
|
|
Costs of Revenues |
|
|
|
|
Government Solutions |
42,866 |
47,245 |
197,380 |
159,180 |
Commercial Cyber Solutions |
540 |
547 |
1,840 |
547 |
Total |
43,406 |
47,792 |
199,220 |
159,727 |
|
|
|
|
|
Gross Profit |
|
|
|
|
Government Solutions |
22,616 |
23,717 |
91,529 |
81,065 |
Commercial Cyber Solutions |
2,806 |
2,728 |
7,983 |
2,728 |
Total |
25,422 |
26,445 |
99,512 |
83,793 |
|
|
|
|
|
Operating Expenses |
|
|
|
|
Operating expenses |
21,296 |
18,775 |
84,701 |
59,189 |
Intangible amortization
expense |
5,663 |
6,804 |
24,658 |
21,411 |
Total |
26,959 |
25,579 |
109,359 |
80,600 |
|
|
|
|
|
Operating (Loss) Income |
(1,537) |
866 |
(9,847) |
3,193 |
|
|
|
|
|
Non-Operating
Expense, net |
898 |
1,024 |
9,792 |
2,264 |
|
|
|
|
|
(Loss) Income before
Income Taxes |
(2,435) |
(158) |
(19,639) |
929 |
|
|
|
|
|
Income Tax Benefit, net |
(1,925) |
(338) |
(9,005) |
(86) |
|
|
|
|
|
Net (Loss) Income |
$(510) |
$180 |
$(10,634) |
$1,015 |
|
|
|
|
|
Weighted Average Common Shares
Outstanding |
|
|
|
|
Basic |
36,824,514 |
35,725,283 |
36,618,919 |
28,239,945 |
Diluted |
36,824,514 |
38,836,329 |
36,618,919 |
31,152,924 |
|
|
|
|
|
(Loss) Earnings per Share |
|
|
|
|
Basic |
$(0.01) |
$0.01 |
$(0.29) |
$0.04 |
Diluted |
$(0.01) |
$0.00 |
$(0.29) |
$0.03 |
|
|
|
|
|
|
|
|
THE KEYW HOLDING
CORPORATION AND SUBSIDIARIES |
CONSOLIDATED BALANCE
SHEETS |
(In thousands, except
per share amounts) |
|
|
|
|
December 31, |
December 31, |
|
2013 |
2012 |
ASSETS |
|
|
Current assets: |
|
|
Cash and cash equivalents |
$2,480 |
$5,639 |
Receivables |
51,198 |
58,482 |
Inventories, net |
11,305 |
8,739 |
Prepaid expenses |
2,009 |
1,880 |
Income tax receivable |
-- |
96 |
Deferred tax asset,
current |
2,556 |
3,149 |
Total current
assets |
69,548 |
77,985 |
|
|
|
Property and equipment, net |
26,826 |
23,860 |
Goodwill |
297,484 |
290,861 |
Other intangibles, net |
29,343 |
53,799 |
Deferred tax assets |
17,483 |
13,608 |
Other assets |
3,038 |
2,562 |
TOTAL ASSETS |
$443,722 |
$462,675 |
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY |
|
|
Current liabilities: |
|
|
Revolver |
$22,000 |
$21,000 |
Accounts payable |
8,004 |
7,254 |
Accrued expenses |
1,495 |
5,488 |
Accrued salaries &
wages |
11,948 |
17,770 |
Term note – current
portion |
7,000 |
5,688 |
Deferred revenue |
2,745 |
2,905 |
Deferred income taxes |
1,423 |
1,429 |
Total current liabilities |
54,615 |
61,534 |
Long-term liabilities: |
|
|
Term note – non-current
portion |
56,000 |
63,000 |
Non-current deferred tax
liabilities |
25,578 |
29,700 |
Other non-current
liabilities |
7,292 |
7,413 |
TOTAL LIABILITIES |
143,485 |
161,647 |
|
|
|
Commitments and contingencies |
-- |
-- |
|
|
|
Stockholders' equity: |
|
|
Preferred stock, $0.001 par
value; 5 million shares authorized, none issued |
-- |
-- |
Common stock, $0.001 par value;
100 million shares authorized, 36,925,730 and 36,135,542 shares
issued and outstanding |
37 |
36 |
Additional paid-in capital |
302,557 |
292,715 |
Retained earnings |
(2,357) |
8,277 |
Total stockholders' equity |
300,237 |
301,028 |
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY |
$443,722 |
$462,675 |
|
|
|
|
|
|
THE KEYW HOLDING
CORPORATION AND SUBSIDIARIES |
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS |
(In
thousands) |
|
|
|
|
Year ended |
Year ended |
|
December 31, |
December 31, |
|
2013 |
2012 |
|
|
|
Net (loss) income |
$(10,634) |
$1,015 |
Adjustments to reconcile net (loss)
income to net cash provided by operating activities: |
|
|
Stock compensation |
5,731 |
3,024 |
Depreciation/Amortization |
30,667 |
25,780 |
Loss on disposal of
equipment |
20 |
87 |
Non-cash impact of TI earn-out
reduction |
(146) |
-- |
Windfall tax benefit from
option exercise |
(219) |
(140) |
Deferred taxes |
(7,191) |
(1,864) |
Decrease (increase) in balance
sheet items: |
|
|
Receivables |
7,587 |
(8,546) |
Inventory |
(1,989) |
(1,313) |
Prepaid
expenses |
(114) |
910 |
Income tax
receivable |
96 |
(69) |
Accounts
payable |
184 |
(298) |
Accrued
expenses |
(8,395) |
(2,429) |
Other balance
sheet changes |
(477) |
(2,128) |
Net cash provided by operating activities |
15,120 |
14,029 |
|
|
|
Cash flows from investing
activities: |
|
|
Acquisitions, net of cash
acquired |
(6,751) |
(131,392) |
Purchase of property and
equipment |
(6,236) |
(9,174) |
Capitalized software
development costs |
(2,716) |
(1,547) |
Proceeds from sale of
equipment |
28 |
-- |
Net cash
used in investing activities |
(15,675) |
(142,113) |
|
|
|
Cash flows from financing
activities: |
|
|
Proceeds from stock
issuances |
-- |
94,451 |
Proceeds from term note |
-- |
70,000 |
Proceeds from revolver |
60,000 |
51,500 |
Repayment of debt |
(64,688) |
(81,312) |
Repurchase of stock |
-- |
(2,948) |
Windfall tax benefit from
option exercise |
219 |
140 |
Proceeds from option and
warrant exercises |
1,865 |
598 |
Net cash
(used in) provided by financing activities |
(2,604) |
132,429 |
|
|
|
Net increase (decrease) in cash and
cash equivalents |
(3,159) |
4,345 |
Cash and cash equivalents at
beginning of period |
5,639 |
1,294 |
Cash and cash equivalents at end of
period |
$2,480 |
$5,639 |
|
|
|
Pro Forma
Revenue
The tables below summarize the unaudited pro forma statement of
operations for the three and twelve months ended December 31, 2012,
assuming the Poole and Sensage acquisitions had been completed on
January 1, 2012. Pro forma income statements are not presented for
2013 as there have been no material acquisitions during the year
ended December 31, 2013. These pro forma statements do not include
any adjustments that may have resulted from synergies between the
acquisitions, eliminations of intercompany transactions or from
amortization of intangibles other than during the period the
acquired entities were part of the Company. The 2012 activity for
Poole and Sensage represents the financial activity in 2012 prior
to acquisition. Activity for the Rsignia, Dilijent and IDEAL
acquisitions are not included for any period presented due to their
immateriality individually and in aggregate.
|
For Three Months ended
December 31, 2012 |
|
|
(In Thousands and Unaudited) |
|
|
|
|
|
|
|
Sensage |
KEYW |
Total |
|
Revenue |
$197 |
$74,237 |
$74,434 |
|
|
|
|
|
|
For Year ended December
31, 2012 |
|
(In
Thousands and Unaudited) |
|
|
|
|
|
|
Poole |
Sensage |
KEYW |
Total |
Revenue |
$42,321 |
$6,820 |
$243,520 |
$292,661 |
A conference call has been scheduled to discuss these results on
February 4, 2014 at 5:00 p.m. (EST). At that time, Management will
review the Company's fourth quarter and full year 2013 financial
results, followed by a question-and-answer session to further
discuss the results.
Interested parties will be able to connect to our Webcast via
the Investor page on our website, http://investors.keywcorp.com on
February 4, 2014. We encourage people to register for an email
reminder about the Webcast on the Event Calendar tab, also found on
the Investors page of our website. Interested parties may also
listen to the conference call by calling 1-877-853-5645. The
International Dial-In access number will be 1-408-940-3868. The
conference ID for the event is 43264451.
An archive of the Webcast will be available on our webpage
following the call. In addition, a podcast of our conference call
will be available for download from our Investors page of our
website at approximately the same time as the webcast replay.
About KEYW
KEYW provides agile cyber superiority, cybersecurity, and
geospatial intelligence solutions for U.S. Government intelligence
and defense customers and commercial enterprises. We create our
solutions by combining our services and expertise with hardware,
software, and proprietary technology to meet our customers'
requirements. For more information contact KEYW Corporation, 7740
Milestone Parkway, Suite 400, Hanover, Maryland 21076; Phone
443-733-1600; Fax 443-733-1601; E-mail investors@keywcorp.com; or
on the Web at www.keywcorp.com.
Forward-Looking Statements: Statements made in this
press release that are not historical facts constitute
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Such statements
include but are not limited to statements about our expected 2014
revenue growth in our Commercial Cyber Solutions segment,
statements about our expectations regarding the 2014 environment
for our government customers, statements about our future
expectations, plans and prospects, and other statements containing
the words "estimates," "believes," "anticipates," "plans,"
"expects," "will," "potential," "opportunities", and similar
expressions. Our actual results, performance or achievements or
industry results may differ materially from those expressed or
implied in these forward-looking statements. These statements
involve numerous risks and uncertainties, including but not limited
to those risk factors set forth in our Annual Report on Form 10-K,
dated and filed March 12, 2013 with the Securities and Exchange
Commission (SEC) as required under the Securities Act of 1934, and
other filings that we make with the SEC from time to time. Due
to such uncertainties and risks, readers are cautioned not to place
undue reliance on such forward-looking statements. KEYW is
under no obligation to (and expressly disclaims any such obligation
to) update or alter its forward-looking statements whether as a
result of new information, future events or otherwise.
CONTACT: Chris Donaghey
443-733-1600
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