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KEYW Reports Q4 and 2013 Financial Results

(February 04, 2014)

HANOVER, Md., Feb. 4, 2014 (GLOBE NEWSWIRE) -- 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 

Three 

 

 

 

months 

months 

 

 

 

ended 

ended 

Year ended 

Year ended 

 

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

Page: 1


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