HANOVER, Md., July 31, 2013 (GLOBE NEWSWIRE) -- The KEYW Holding Corporation (Nasdaq: KEYW ) announces Q2 2013 revenue of $78.3 million, an increase of 39% versus Q2 2012. GAAP loss per share was $0.06 in Q2 2013 on a fully diluted basis, versus GAAP earnings per share (EPS) of $0.01 in Q2 2012. Amortization associated with acquisition-related intangibles reduced Q2 2013 EPS by approximately $0.10 per share on an after tax basis. Adjusted EBITDA (as described below) for Q2 2013 was $6.5 million, compared to $7.6 million in Q2 2012. As a percentage of revenue, Adjusted EBITDA margin was 8.2% in Q2 2013, a decrease from 13.5% in Q2 2012. Net cash provided from operations in Q2 2013 was almost $9 million despite continued elevated R&D spending and further investment in the infrastructure for our commercial cyber products business. In Q2 2013, KEYW was awarded new funding actions of $77 million and ended the quarter with 1,124 employees.
"The second quarter was a quarter marked by exasperation and excitement," commented Leonard Moodispaw, CEO and President of KEYW. "Exasperation because government agencies are still dealing with the impact of sequestration and our government business continues to have uncertainty that will likely persist through the remainder of 2013. This uncertainty is offset by excitement and further advances in our commercial cyber business which, as of today, has been renamed Hexis Cyber Solutions, Inc. We continue to make progress with our four commercial beta customers and we still anticipate material commercial business revenue contributions in Q4 2013."
Revenue for Q2 2013 increased 39% versus Q2 2012 from $56.2 million to $78.3 million. The main drivers for the increase were organic growth in both segments of our business and revenue from Poole & Associates and Sensage, both acquired in October 2012. Consolidated gross margin decreased from 34% in Q2 2012 to 33% in Q2 2013 due to a greater contribution from subcontractors in our Engineering Services segment. Research and development expenses were $1.8 million in Q2 2013, an increase from $1.6 million in Q2 2012. Increased infrastructure spending in our commercial cyber business (including R&D) accounted for $1.9 million in growth in pro forma operating expenses versus Q2 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 June 30, 2013 | Three months ended June 30, 2012 | Six months ended June 30, 2013 | Six months ended June 30, 2012 | |
| (Unaudited and in thousands) | ||||
| Net (Loss) Income | $ (2,360) | $ 325 | $ (4,622) | $ 493 |
| Depreciation | 1,494 | 1,032 | 2,839 | 2,059 |
| Intangible Amortization | 6,091 | 4,869 | 13,012 | 9,738 |
| Acquisition and IPO Costs | 280 | 24 | 424 | 47 |
| Stock Compensation Amortization | 1,533 | 698 | 2,819 | 1,346 |
| Interest Expense, net | 912 | 456 | 1,826 | 873 |
| Tax (Benefit) Expense | (1,500) | 200 | (3,036) | 266 |
| Adjusted EBITDA | $ 6,450 | $ 7,604 | $ 13,262 | $ 14,822 |
| The KEYW Holding Corporation Financial Highlights | ||||
| Condensed Consolidated Statements of Operations | ||||
| (In thousands, except share and per share amounts) | ||||
| Three months ended June 30, 2013 | Three months ended June 30, 2012 | Six months ended June 30, 2013 | Six months ended June 30, 2012 | |
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |
| Revenues | ||||
| Services | $ 55,499 | $ 39,076 | $ 114,342 | $ 78,931 |
| Integrated Solutions | 22,759 | 17,079 | 41,788 | 33,000 |
| Total | 78,258 | 56,155 | 156,130 | 111,931 |
| Costs of Revenues, excluding amortization | ||||
| Services | 40,961 | 28,113 | 85,369 | 56,990 |
| Integrated Solutions | 11,697 | 9,109 | 21,099 | 17,079 |
| Total | 52,658 | 37,222 | 106,468 | 74,069 |
| Gross Profit | ||||
| Services | 14,538 | 10,963 | 28,973 | 21,941 |
| Integrated Solutions | 11,062 | 7,970 | 20,689 | 15,921 |
| Total | 25,600 | 18,933 | 49,662 | 37,862 |
| Operating Expenses | ||||
| Operating expenses | 22,501 | 13,089 | 42,734 | 26,501 |
| Intangible amortization expense | 6,091 | 4,869 | 13,012 | 9,738 |
| Total | 28,592 | 17,958 | 55,746 | 36,239 |
| Operating (Loss) Income | (2,992) | 975 | (6,084) | 1,623 |
| Non-Operating Expense, net | 868 | 450 | 1,574 | 864 |
| (Loss) Income before Income Taxes | (3,860) | 525 | (7,658) | 759 |
| Income Tax (Benefit) Expense, net | (1,500) | 200 | (3,036) | 266 |
| Net (Loss) Income | $ (2,360) | $ 325 | $ (4,622) | $ 493 |
| Weighted Average Common Shares Outstanding | ||||
| Basic | 36,612,537 | 25,553,097 | 36,489,914 | 25,679,720 |
| Diluted | 36,612,537 | 28,353,011 | 36,489,914 | 28,085,331 |
| (Loss) Earnings per Share | ||||
| Basic | $ (0.06) | $ 0.01 | $ (0.13) | $ 0.02 |
| Diluted | $ (0.06) | $ 0.01 | $ (0.13) | $ 0.02 |
| Condensed Consolidated Balance Sheet | ||
| (In thousands, except share and par value amounts) | ||
| June 30, 2013 | December 31, 2012 | |
| (Unaudited) | ||
| ASSETS | ||
| Current assets: | ||
| Cash and cash equivalents | $ 2,840 | $ 5,639 |
| Receivables | 59,791 | 58,482 |
| Inventories, net | 9,001 | 8,739 |
| Prepaid expenses | 2,164 | 1,880 |
| Income tax receivable | — | 96 |
| Deferred tax asset, current | 3,149 | 3,149 |
| Total current assets | 76,945 | 77,985 |
| Property and equipment, net | 27,798 | 23,860 |
| Goodwill | 297,484 | 290,861 |
| Other intangibles, net | 40,989 | 53,799 |
| Deferred tax asset | 13,608 | 13,608 |
| Other assets | 2,309 | 2,562 |
| TOTAL ASSETS | $ 459,133 | $ 462,675 |
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||
| Current liabilities: | ||
| Revolver | $ 24,000 | $ 21,000 |
| Accounts payable | 10,085 | 7,254 |
| Accrued expenses | 4,542 | 5,488 |
| Accrued salaries & wages | 15,059 | 17,770 |
| Term note – current portion | 6,563 | 5,688 |
| Deferred revenue | 3,156 | 2,905 |
| Deferred income taxes | 1,429 | 1,429 |
| Total current liabilities | 64,834 | 61,534 |
| Long-term liabilities: | ||
| Term note – non-current portion | 59,500 | 63,000 |
| Non-current deferred tax liability | 24,674 | 29,700 |
| Other non-current liabilities | 7,537 | 7,413 |
| TOTAL LIABILITIES | 156,545 | 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, 36,658,510 and 36,135,542 shares issued and outstanding | 37 | 36 |
| Additional paid-in capital | 298,896 | 292,715 |
| Retained earnings | 3,655 | 8,277 |
| Total stockholders' equity | 302,588 | 301,028 |
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 459,133 | $ 462,675 |
| Condensed Consolidated Statements of Cash Flows | ||
| (In thousands) | ||
| Six months ended June 30, 2013 | Six months ended June 30, 2012 | |
| (Unaudited) | (Unaudited) | |
| Net (loss) income | $ (4,622) | $ 493 |
| Adjustments to reconcile net (loss) income to net cash provided by operating activities: | ||
| Stock compensation | 2,820 | 1,346 |
| Depreciation/Amortization | 15,851 | 11,797 |
| Non-cash impact of TI earn-out reduction | (146) | — |
| Deferred taxes | (3,398) | — |
| Changes in operating assets and liabilities: | ||
| Receivables | (1,005) | (10,566) |
| Inventories, net | 316 | (1,434) |
| Prepaid expenses | (270) | (462) |
| Income tax receivable | 96 | — |
| Accounts payable | 2,267 | 570 |
| Accrued expenses | (3,210) | 1,363 |
| Other balance sheet changes | 251 | — |
| Net cash provided by operating activities | 8,950 | 3,107 |
| Cash flows from investing activities: | ||
| Acquisitions, net of cash acquired | (6,751) | — |
| Purchases of property and equipment | (3,991) | (4,141) |
| Capitalized software development costs | (2,716) | — |
| Net cash used in investing activities | (13,458) | (4,141) |
| Cash flows from financing activities: | ||
| Proceeds from revolver, net | 3,000 | 2,700 |
| Repayment of debt | (2,625) | — |
| Repurchase of stock | — | (2,948) |
| Proceeds from option and warrants exercises | 1,334 | 222 |
| Net cash provided by (used in) financing activities | 1,709 | (26) |
| Net decrease in cash and cash equivalents | (2,799) | (1,060) |
| Cash and cash equivalents at beginning of period | 5,639 | 1,294 |
| Cash and cash equivalents at end of period | $ 2,840 | $ 234 |
| Supplemental disclosure of cash flow information: | ||
| Cash paid for interest | $ 1,844 | $ 878 |
| Cash paid for taxes | $ 2,123 | $ 2,791 |
Pro Forma Revenue Reconciliation
The tables below summarize the unaudited pro forma statement of operations for the three and six months ended June 30, 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 six months ended June 30, 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 the Three Months Ended June 30, 2012 (In thousands) | ||||
| Poole | Sensage | KEYW | Total | |
| Revenues | $ 12,313 | $ 2,312 | $ 56,155 | $ 70,780 |
| For the Six Months Ended June 30, 2012 (In thousands) | ||||
| Poole | Sensage | KEYW | Total | |
| Revenues | $ 24,271 | $ 4,369 | $ 111,931 | $ 140,571 |
KEYW has scheduled a conference call to discuss these results today, July 31, 2013, at 5:00 p.m. (EDT). Interested parties will be able to connect to our Webcast via the Investor page on our website, http://investors.keywcorp.com . 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 this event is 21049372.
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 future expectations, plans and prospects (including without limitation statements about our commercial cyber business and its anticipated revenue contributions), 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.
Chris Donaghey 443-733-1600
