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KEYW Reports Q2 2014 Financial Results

(July 31, 2014)

HANOVER, Md., July 31, 2014 (GLOBE NEWSWIRE) -- The KEYW Holding Corporation (Nasdaq:KEYW) announces final Q2 2014 revenue of $74.2 million, a decrease of 5% versus Q2 2013. GAAP loss per share was $0.05 in Q2 2014 on a fully diluted basis, versus GAAP loss per share on a fully-diluted basis of $0.06 in Q2 2013. Amortization associated with acquisition-related intangibles reduced Q2 2014 EPS by approximately $0.05 per share on an after-tax basis. Adjusted EBITDA (as described below) for Q2 2014 was $5.1 million, compared to $6.5 million in Q2 2013. As a percentage of revenue, Adjusted EBITDA margin was 6.9% in Q2 2014, a decrease from 8.2% in Q2 2013. In Q2 2014, KEYW was awarded new funding actions of $65 million and ended the quarter with 1,071 employees.



"As we discussed on our first quarter conference call, I am very pleased to see a strong sequential rebound in KEYW's Government Solutions business," commented Len Moodispaw, Chairman and CEO of KEYW. "We also continued to make progress in our HawkEye G business development metrics with now 13 installed systems and a HawkEye G pilot pipeline of 35 organizations spanning the government, healthcare, financial services, energy, and technology industries."



In KEYW's Government Solutions segment, revenue in Q2 2014 was $72.1 million, a decrease of 4.9% versus last year with the largest drivers of the decrease attributed to sequestration-related cuts. Second quarter 2014 gross margin of 31% was essentially flat as compared with Q2 2013. Cost reductions in the Government Solutions segment increased the adjusted EBITDA margin for the Government Solutions segment from 11% in Q2 2013 to 17% in Q2 2014.


Revenue in KEYW's Commercial Cyber Solutions segment was $2.2 million in Q2 2014, down from $2.4 million in Q2 2013. Bookings in Q2 2014 were $2.2 million. Operating expense in Q2 2014 increased to $9.3 million from $3.8 million in Q2 2013 due to additional investment in the infrastructure of the segment. These investments include substantial increases to the sales and customer support teams and growth in the engineering department.




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.














































































































































































































































































































































































































































































































































































































































































 

Three months ended

June 30, 2014

 Three months ended

June 30, 2013

Six months ended

June 30, 2014

Six months ended

June 30, 2013

 

(Unaudited and in thousands)

Net Loss

$ (1,730)

$ (2,360)

$ (4,806)

$ (4,622)

Depreciation

 1,916

 1,494

 3,471

 2,839

Intangible Amortization

 2,934

 6,091

 6,059

 13,012

Acquisition Costs and Other Nonrecurring Costs

 29

 280

 30

 423

(1)

Stock Compensation Amortization

 1,678

 1,533

 3,302

 2,820

Interest Expense

 1,220

 912

 2,078

 1,826

Tax Benefit

 (955)

 (1,500)

 (2,624)

 (3,036)

Adjusted EBITDA

 $ 5,092

 $ 6,450

 $ 7,510

 $ 13,262

 

 

 

 

 

(1)  Includes non-cash gain associated with the write-down of the earn-out from the National Semiconductor asset purchase.

 

 

 

 

 

 

 

 

 

 

THE KEYW HOLDING CORPORATION AND SUBSIDIARIES

Government Solutions Statements of Operations

(In thousands)

 

 

 

 

 

 

Three months ended

June 30, 2014

 Three months ended

June 30, 2013

Six months ended

June 30, 2014

Six months ended

June 30, 2013

 

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

 

 

 

 

 

Revenues

 $ 72,057

 $ 75,809

 $ 133,365

 $ 151,663

Costs of Revenues, excluding amortization

 49,861

 52,195

 91,630

 105,549

Gross Profit

 22,196

 23,614

 41,735

 46,114

 

 

 

 

 

Operating expenses

 13,103

 18,718

 26,815

 35,753

Intangible amortization expense

 1,919

 5,060

 4,062

 10,950

Net Operating Income (Loss)

 7,174

 (164)

 10,858

 (589)

 

 

 

 

 

Reconciliation of Net Operating Income (Loss) to Adjusted EBITDA:

 

 

 

 

 

 

 

 

 

Depreciation

 1,421

 1,422

 2,827

 2,754

Intangible Amortization

 1,919

 5,060

 4,062

 10,950

Acquisition Costs and Other Nonrecurring Costs

 29

 280

 30

 423

(1)

Stock Compensation Amortization

 1,678

 1,533

 3,302

 2,820

Other Non-operating Income

 21

 44

 23

 252

Segment Adjusted EBITDA

 $ 12,242

 $ 8,175

 $ 21,102

 $ 16,610

 

 

 

 

 

(1)  Includes non-cash gain associated with the write-down of the earn-out from the National Semiconductor asset purchase.

 

 

 

 

 

 

 

 

 

 

THE KEYW HOLDING CORPORATION AND SUBSIDIARIES

Commercial Cyber Solutions Statements of Operations

(In thousands)

 

 

 

 

 

 

Three months ended

June 30, 2014

Three months ended 

 June 30, 2013

Six months ended

June 30, 2014

Six months ended

June 30, 2013

 

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

 

 

 

 

 

Revenues

 $ 2,172

 $ 2,449

 $ 4,671

 $ 4,467

Costs of Revenues, excluding amortization

 519

 463

 1,065

 919

Gross Profit

 1,653

 1,986

 3,606

 3,548

 

 

 

 

 

Operating expenses

 9,299

 3,783

 17,842

 6,981

Intangible amortization expense

 1,015

 1,031

 1,997

 2,062

Net Operating Loss

 (8,661)

 (2,828)

 (16,233)

 (5,495)

 

 

 

 

 

Reconciliation of Net Operating Income (Loss) to Adjusted EBITDA:

 

 

 

 

 

 

 

 

 

Depreciation

 496

 72

 644

 85

Intangible Amortization

 1,015

 1,031

 1,997

 2,062

Acquisition Costs and Other Nonrecurring Costs

 -- 

 -- 

 -- 

 -- 

Stock Compensation Amortization

 -- 

 -- 

 -- 

 -- 

Other Income

 -- 

 -- 

 -- 

 -- 

Segment Adjusted EBITDA

$ (7,150)

$ (1,725)

$ (13,592)

$ (3,348)

 

 

 

 

 

 

 

 

 

 

THE KEYW HOLDING CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share amounts)

 

 

 

 

 

 

Three months ended

June 30, 2014

 Three months ended

June 30, 2013

Six months ended

June 30, 2014

Six months ended

June 30, 2013

 

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

Revenues

 

 

 

 

Government Solutions

 $ 72,057

 $ 75,809

 $ 133,365

 $ 151,663

Commercial Cyber Solutions

 2,172

 2,449

 4,671

 4,467

Total

 74,229

 78,258

 138,036

 156,130

Costs of Revenues, excluding amortization

 

 

 

 

Government Solutions

 49,861

 52,195

 91,630

 105,549

Commercial Cyber Solutions

 519

 463

 1,065

 919

Total

 50,380

 52,658

 92,695

 106,468

Gross Profit

 

 

 

 

Government Solutions

 22,196

 23,614

 41,735

 46,114

Commercial Cyber Solutions

 1,653

 1,986

 3,606

 3,548

Total

 23,849

 25,600

 45,341

 49,662

Operating Expenses

 

 

 

 

Operating expenses

 22,402

 22,501

 44,657

 42,734

Intangible amortization expense

 2,934

 6,091

 6,059

 13,012

Total

 25,336

 28,592

 50,716

 55,746

Operating Loss

 (1,487)

 (2,992)

 (5,375)

 (6,084)

Non-Operating Expense, net

 1,198

 868

 2,055

 1,574

Loss before Income Taxes

 (2,685)

 (3,860)

 (7,430)

 (7,658)

Income Tax Benefit, net

 (955)

 (1,500)

 (2,624)

 (3,036)

Net Loss

$ (1,730)

$ (2,360)

$ (4,806)

$ (4,622)

Weighted Average Common Shares Outstanding

 

 

 

 

Basic

 37,467,264

 36,612,537

 37,309,516

 36,489,914

Diluted

 37,467,264

 36,612,537

 37,309,516

 36,489,914

Loss per Share

 

 

 

 

Basic

$ (0.05)

$ (0.06)

$ (0.13)

$ (0.13)

Diluted

$ (0.05)

$ (0.06)

$ (0.13)

$ (0.13)




























































































































































































































 

 

THE KEYW HOLDING CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

 

 

 

 

June 30, 2014

December 31, 2013

 

(Unaudited)

 

ASSETS

 

 

Current assets:

 

 

Cash and cash equivalents

 $ 4,097

 $ 2,480

Receivables

60,815

51,198

Inventories, net

15,405

11,305

Prepaid expenses

2,674

2,009

Income tax receivable

7,209

4,133

Deferred tax asset, current

1,133

1,133

Total current assets

91,333

72,258

 

 

 

Property and equipment, net

28,036

26,826

Goodwill

297,484

297,484

Other intangibles, net

24,852

29,343

Other assets

2,874

3,038

TOTAL ASSETS

 $ 444,579

 $ 428,949

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

Current liabilities:

 

 

Revolver

 $ 30,000

 $ 22,000

Accounts payable

17,413

8,004

Accrued expenses

3,870

5,628

Accrued salaries and wages

14,700

11,948

Term note – current portion

7,000

7,000

Deferred revenue

2,409

2,745

Total current liabilities

75,392

57,325

Long-term liabilities:

 

 

Term note – non-current portion

52,500

56,000

Non-current deferred tax liability

8,211

8,095

Other non-current liabilities

7,057

7,292

TOTAL LIABILITIES

143,160

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, 37,548,949 and 36,925,730 shares issued and outstanding

38

37

Additional paid-in capital

308,544

302,557

Accumulated deficit

(7,163)

(2,357)

Total stockholders' equity

301,419

300,237

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

 $ 444,579

 $ 428,949








































































































































































































 

 

THE KEYW HOLDING CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

 

 

 

 

Six months ended

June 30, 2014

Six months ended

June 30, 2013

 

(Unaudited)

(Unaudited)

Net loss

$ (4,806)

$ (4,622)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

Stock compensation

 3,302

 2,820

Depreciation/Amortization

 9,530

 15,851

Non-cash impact of TI earn-out reduction

 — 

 (146)

Windfall tax benefit from option exercise

 (1,417)

 — 

Deferred taxes

 117

 (3,398)

Changes in operating assets and liabilities:

 

 

Receivables

 (9,616)

 (1,005)

Inventories, net

 (4,036)

 316

Prepaid expenses

 (666)

 (270)

Income tax, net

 (1,474)

 96

Accounts payable

 9,409

 2,267

Accrued expenses

 177

 (3,210)

Other balance sheet changes

 163

 251

  Net cash provided by operating activities

 683

 8,950

Cash flows from investing activities:

 

 

Acquisitions, net of cash acquired

 (580)

 (6,751)

Purchases of property and equipment

 (4,655)

 (3,991)

Capitalized software development costs

 — 

 (2,716)

  Net cash used in investing activities

 (5,235)

 (13,458)

Cash flows from financing activities:

 

 

Proceeds from revolver, net

 8,000

 3,000

Repayment of debt

 (3,500)

 (2,625)

Windfall tax benefit from option exercise

 1,417

 — 

Proceeds from option and warrant exercises, net

 252

 1,334

  Net cash provided by financing activities

 6,169

 1,709

Net increase (decrease) in cash and cash equivalents

 1,617

 (2,799)

Cash and cash equivalents at beginning of period

 2,480

 5,639

Cash and cash equivalents at end of period

 $ 4,097

 $ 2,840

Supplemental disclosure of cash flow information:

 

 

Cash paid for interest

 $ 1,435

 $ 1,844

Cash paid for taxes

 $ 36

 $ 2,123


A conference call has been scheduled to discuss these results on July 31, 2014 at 5:00 p.m. (EDT). At that time, Management will review the Company's second 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 July 31, 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 74646528.



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.


CONTACT: Chris Donaghey
443-733-1600

Page: 1


Related Keywords: DEFENSE, SOFTWARE, EARNINGS, CONFERENCE CALLUSA, Science, Computer Science, Business, Email, Other,


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