HANOVER, Md., Oct. 28, 2014 (GLOBE NEWSWIRE) -- The KEYW Holding Corporation (Nasdaq:KEYW) announces Q3 2014 revenue of $79.0 million, an increase of 7% versus Q3 2013. GAAP loss per share was $0.08 in Q3 2014 on a fully diluted basis, versus GAAP loss per share of $0.15 in Q3 2013, which included an estimated $0.13 per share after tax one-time charge related to litigation settlement. Amortization associated with acquisition-related intangibles reduced Q3 2014 earnings per share by an estimated $0.05 per share on an after-tax basis. Adjusted EBITDA (as described below) for Q3 2014 was $5.0 million, or 6.4% of revenue, and compares to Q3 2013 adjusted EBITDA of $6.8 million, or 9.2% of revenue. In Q3 2014 KEYW was awarded new funding actions of $66.5 million and ended the quarter with 1,081 employees.
"We continued to see strong momentum in the third quarter in our Government Solutions segment with record quarterly revenue and continued strong EBITDA margin," commented Len Moodispaw, Chairman and CEO of KEYW. "We also made good progress in our Commercial Cyber Solutions segment where we announced a major enhancement to our HawkEye G product, grew revenue by more than 50% on a sequential basis, adding several new customers, and further expanded the number of prospects in our pilot queue in industries such as retail, telecommunications, financial services, healthcare, energy and government."
In KEYW's Government Solutions segment, revenue in Q3 2014 was $75.9 million, an increase of 6% versus Q3 2013, with the drivers of the increase associated with organic growth, the reduced impact of sequestration in Q3 2014, and the absence of the October 2013 federal government shutdown. Gross margin in Q3 2014 was 32%, flat with Q3 2013. Adjusted EBITDA margin in the Government Solutions segment was 16% in Q3 2014, up from 15% in Q3 2013.
Revenue in KEYW's Commercial Cyber Solutions segment was $3.0 million in Q3 2014, up 51% versus Q3 2013 revenue of $2.0 million. Bookings in Q3 2014 were $3.1 million. Operating expense in Q3 2014 was $10.3 million, up from $5.5 million in Q3 2013, as a result of continued investment in infrastructure, which included further additions to the product development, marketing, and sales organizations.
Adjusted EBITDA is a financial measure that is not calculated in accordance with accounting principles generally accepted in the United States of America, or US GAAP. The adjusted EBITDA reconciliation tables below provide a reconciliation of this non-US GAAP financial measure to net income (loss), the most directly comparable financial measure calculated and presented in accordance with US GAAP. Adjusted EBITDA should not be considered as an alternative to net income, operating income or any other measure of financial performance calculated and presented in accordance with US GAAP. Our adjusted EBITDA may not be comparable to similarly titled measures of other companies because other companies may not calculate adjusted EBITDA or similarly titled measures in the same manner as we do. We prepare adjusted EBITDA to eliminate the impact of items that we do not consider indicative of our core operating performance. We encourage you to evaluate these adjustments and the reasons we consider them appropriate. 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 US 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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| (Unaudited and in thousands) | ||||
| Net Loss | $ (3,022) | $ (5,502) | $ (7,828) | $ (10,124) |
| Depreciation | 1,812 | 1,471 | 5,282 | 4,311 |
| Intangible Amortization | 3,029 | 5,984 | 9,088 | 18,995 |
| Acquisition Costs and Other Nonrecurring Costs (1) | 51 | 6,507 | 83 | 7,486 |
| Stock Compensation Amortization | 1,751 | 1,494 | 5,052 | 4,314 |
| Interest Expense | 4,348 | 849 | 6,426 | 2,674 |
| Tax Benefit | (2,921) | (4,045) | (5,546) | (7,080) |
| Adjusted EBITDA | $ 5,048 | $ 6,758 | $ 12,557 | $ 20,576 |
| (1) Q3 2013 Other Non-recurring Costs include the 2013 legal settlement. | ||||
| THE KEYW HOLDING CORPORATION AND SUBSIDIARIES | ||||
| Government Solutions Statements of Operations | ||||
| (In thousands) | ||||
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| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |
| Revenues | $ 75,932 | $ 71,762 | $ 209,297 | $ 223,427 |
| Costs of Revenues, excluding amortization | 51,889 | 48,964 | 143,519 | 154,514 |
| Gross Profit | 24,043 | 22,798 | 65,778 | 68,913 |
| Operating expenses | 14,879 | 15,193 | 41,694 | 50,947 |
| Intangible amortization expense | 1,881 | 4,952 | 5,943 | 15,902 |
| Net Operating Income | 7,283 | 2,653 | 18,141 | 2,064 |
| Reconciliation of Net Operating Income to Adjusted EBITDA: | ||||
| Depreciation | 1,181 | 1,398 | 4,007 | 4,152 |
| Intangible Amortization | 1,881 | 4,952 | 5,943 | 15,902 |
| Acquisition Costs and Other Nonrecurring Costs | 51 | 62 | 83 | 1,039 |
| Stock Compensation Amortization | 1,751 | 1,494 | 5,052 | 4,314 |
| Other Non-operating Income (Loss) | 107 | (27) | 130 | 226 |
| Segment Adjusted EBITDA | $ 12,254 | $ 10,532 | $ 33,356 | $ 27,697 |
| THE KEYW HOLDING CORPORATION AND SUBSIDIARIES | ||||
| Commercial Cyber Solutions Statements of Operations | ||||
| (In thousands) | ||||
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| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |
| Revenues | $ 3,037 | $ 2,011 | $ 7,708 | $ 6,477 |
| Costs of Revenues, excluding amortization | 586 | 382 | 1,651 | 1,300 |
| Gross Profit | 2,451 | 1,629 | 6,057 | 5,177 |
| Operating expenses | 10,288 | 5,476 | 28,131 | 12,457 |
| Intangible amortization expense | 1,148 | 1,032 | 3,145 | 3,093 |
| Net Operating Loss | (8,985) | (4,879) | (25,219) | (10,373) |
| Reconciliation of Net Operating Loss to Adjusted EBITDA: | ||||
| Depreciation | 631 | 73 | 1,275 | 159 |
| Intangible Amortization | 1,148 | 1,032 | 3,145 | 3,093 |
| Acquisition Costs and Other Nonrecurring Costs | -- | -- | -- | -- |
| Stock Compensation Amortization | -- | -- | -- | -- |
| Other Income | -- | -- | -- | -- |
| Segment Adjusted EBITDA | $ (7,206) | $ (3,774) | $ (20,799) | $ (7,121) |
| THE KEYW HOLDING CORPORATION AND SUBSIDIARIES | ||||
| CONSOLIDATED STATEMENTS OF OPERATIONS | ||||
| (In thousands, except share and per share amounts) | ||||
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| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |
| Revenues | ||||
| Government Solutions | $ 75,932 | $ 71,762 | $ 209,297 | $ 223,427 |
| Commercial Cyber Solutions | 3,037 | 2,011 | 7,708 | 6,477 |
| Total | 78,969 | 73,773 | 217,005 | 229,904 |
| Costs of Revenues, excluding amortization | ||||
| Government Solutions | 51,889 | 48,964 | 143,519 | 154,514 |
| Commercial Cyber Solutions | 586 | 382 | 1,651 | 1,300 |
| Total | 52,475 | 49,346 | 145,170 | 155,814 |
| Gross Profit | ||||
| Government Solutions | 24,043 | 22,798 | 65,778 | 68,913 |
| Commercial Cyber Solutions | 2,451 | 1,629 | 6,057 | 5,177 |
| Total | 26,494 | 24,427 | 71,835 | 74,090 |
| Operating Expenses | ||||
| Operating expenses | 25,167 | 20,669 | 69,825 | 63,404 |
| Intangible amortization expense | 3,029 | 5,984 | 9,088 | 18,995 |
| Total | 28,196 | 26,653 | 78,913 | 82,399 |
| Operating Loss | (1,702) | (2,226) | (7,078) | (8,309) |
| Non-Operating Expense, net | 4,241 | 7,321 | 6,296 | 8,895 |
| Loss before Income Taxes | (5,943) | (9,547) | (13,374) | (17,204) |
| Income Tax Benefit, net | (2,921) | (4,045) | (5,546) | (7,080) |
| Net Loss | $ (3,022) | $ (5,502) | $ (7,828) | $ (10,124) |
| Weighted Average Common Shares Outstanding | ||||
| Basic | 37,571,677 | 36,708,835 | 37,394,789 | 36,554,964 |
| Diluted | 37,571,677 | 36,708,835 | 37,394,789 | 36,554,964 |
| Loss per Share | ||||
| Basic | $ (0.08) | $ (0.15) | $ (0.21) | $ (0.28) |
| Diluted | $ (0.08) | $ (0.15) | $ (0.21) | $ (0.28) |
| THE KEYW HOLDING CORPORATION AND SUBSIDIARIES | ||
| CONSOLIDATED BALANCE SHEETS | ||
| (In thousands, except share and per share amounts) | ||
| September 30, | December 31, | |
| 2014 | 2013 | |
| (Unaudited) | ||
| ASSETS | ||
| Current assets: | ||
| Cash and cash equivalents | $ 47,174 | $ 2,480 |
| Receivables | 47,941 | 51,198 |
| Inventories, net | 16,232 | 11,305 |
| Prepaid expenses | 2,623 | 2,009 |
| Income tax receivable | 8,952 | 4,133 |
| Deferred tax asset, current | 787 | 1,133 |
| Total current assets | 123,709 | 72,258 |
| Property and equipment, net | 28,068 | 26,826 |
| Goodwill | 297,484 | 297,484 |
| Other intangibles, net | 24,183 | 29,343 |
| Other assets | 5,515 | 3,038 |
| TOTAL ASSETS | $ 478,959 | $ 428,949 |
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||
| Current liabilities: | ||
| Revolver | $ — | $ 22,000 |
| Accounts payable | 10,947 | 8,004 |
| Accrued expenses | 7,406 | 5,628 |
| Accrued salaries and wages | 14,252 | 11,948 |
| Term note – current portion | — | 7,000 |
| Deferred revenue | 1,752 | 2,745 |
| Total current liabilities | 34,357 | 57,325 |
| Long-term liabilities: | ||
| Convertible senior notes, net of discount | 123,096 | — |
| Term note – non-current portion | — | 56,000 |
| Non-current deferred tax liability | 7,491 | 8,095 |
| Other non-current liabilities | 6,842 | 7,292 |
| TOTAL LIABILITIES | 171,786 | 128,712 |
| 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, 37,583,787 and 36,925,730 shares issued and outstanding | 38 | 37 |
| Additional paid-in capital | 317,320 | 302,557 |
| Accumulated deficit | (10,185) | (2,357) |
| Total stockholders' equity | 307,173 | 300,237 |
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 478,959 | $ 428,949 |
| THE KEYW HOLDING CORPORATION AND SUBSIDIARIES | ||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||
| (In thousands) | ||
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| (Unaudited) | (Unaudited) | |
| Net loss | $ (7,828) | $ (10,124) |
| Adjustments to reconcile net loss to net cash provided by operating activities: | ||
| Stock compensation | 5,052 | 4,314 |
| Depreciation/Amortization | 14,370 | 23,306 |
| Amortization of discount on convertible debt | 967 | — |
| Write-off of deferred financing costs | 1,976 | — |
| Non-cash impact of TI earn-out reduction | — | (146) |
| Windfall tax benefit from option exercise | (382) | — |
| Deferred taxes | (258) | (5,310) |
| Changes in operating assets and liabilities: | ||
| Receivables | 3,257 | 8,580 |
| Inventories, net | (4,863) | (1,497) |
| Prepaid expenses | (67) | (990) |
| Income taxes, net | (4,251) | 96 |
| Accounts payable | 2,943 | 247 |
| Accrued expenses | 2,393 | 702 |
| Other balance sheet changes | 406 | 195 |
| Net cash provided by operating activities | 13,715 | 19,373 |
| Cash flows from investing activities: | ||
| Acquisitions, net of cash acquired | (2,940) | (6,751) |
| Purchases of property and equipment | (6,499) | (5,443) |
| Capitalized software development costs | — | (2,716) |
| Net cash used in investing activities | (9,439) | (14,910) |
| Cash flows from financing activities: | ||
| Proceeds from issuance of convertible debt | 149,500 | — |
| Purchase of convertible note hedges | (18,403) | — |
| Issuance cost of convertible senior notes and revolving credit facility | (6,446) | — |
| Repayment of revolver, net | (22,000) | (1,000) |
| Repayment of term note | (63,000) | (3,938) |
| Windfall tax benefit from option exercise | 382 | — |
| Proceeds from option and warrant exercises, net | 385 | 1,454 |
| Net cash provided by (used in) financing activities | 40,418 | (3,484) |
| Net increase in cash and cash equivalents | 44,694 | 979 |
| Cash and cash equivalents at beginning of period | 2,480 | 5,639 |
| Cash and cash equivalents at end of period | $ 47,174 | $ 6,618 |
| Supplemental disclosure of cash flow information: | ||
| Cash paid for interest | $ 1,676 | $ 2,711 |
| Cash paid for taxes | $ 71 | $ 2,625 |
A conference call has been scheduled to discuss these results on October 28, 2014 at 5:00 p.m. (EDT). At that time, Management will review the Company's third quarter 2014 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 October 28, 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 18534497.
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 US 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 The KEYW Holding Corporation, 7740 Milestone Parkway, Suite 400, Hanover, Maryland 21076; Phone 443-733-1600; Fax 443-733-1601; E-mail investors@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 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 10, 2014 with the 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. All forward-looking statements in this press release are qualified in their entirety by this cautionary statement.