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| 8-K - 8-K - KEYW HOLDING CORP | keyw-20131231x8ker.htm |
FOR IMMEDIATE RELEASE Contact: Chris Donaghey
443-733-1600
KEYW Reports Q4 and 2013 Financial Results
HANOVER, MD, February 4, 2014 (GlobeNewswire) – 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.
Three months ended December 31, 2013 | Three months ended December 31, 2012 | Year ended December 31, 2013 | Year ended December 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 ended December 31, 2013 | Three months ended December 31, 2012 | Year ended December 31, 2013 | Year ended December 31, 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, 2013 | December 31, 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 December 31, 2013 | Year ended December 31, 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.
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