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KEYW Reports Q3 2012 Financial Results

HANOVER, Md., Oct. 31, 2012 (GLOBE NEWSWIRE) -- The KEYW Holding Corporation (Nasdaq:KEYW) today announced financial results for its third quarter ended September 30, 2012. Third quarter 2012 revenue was $57.4 million with GAAP earnings per share (EPS) of $0.01. Adjusted EBITDA (as described below) for Q3 2012 was $7.8 million or 13.5% of Q3 2012 revenue. KEYW posted another strong quarter of cash generation with net cash provided by operations of $11.3 million while R&D remains at elevated levels. In Q3 2012, KEYW received new funding totaling almost $49 million in value. Year-to-date 2012 funding totals $174 million.

"The third quarter of 2012 was a notable quarter for KEYW. Not only did we see solid business execution and financial results, but we also announced and, subsequent to quarter end, closed two major acquisitions: Poole & Associates and SenSage. KEYW also completed a successful $100 million secondary offering of our common stock," commented Leonard Moodispaw, CEO and President of KEYW. "We expect the acquisitions of Poole, which adds several key prime contract vehicles, and SenSage, a major technology contributor to our 'horizontal path' efforts, to play key roles in the next chapter of KEYW's story. We look forward to a strong ending to 2012, and more importantly, we look forward to a transformational 2013."

Revenue for Q3 2012 increased 6% versus Q3 2011 from $54.0 million to $57.4 million. The main driver for the increase was the acquisition of Flight Landata in August 2011 offset in part by decreases in our Air Force services work, the reassignment of a contract to another company, and increased use of billable staff for internal research and development programs. Revenue in Q3 2011 also included a large product delivery order. Consolidated gross margin increased from 28% in Q3 2011 to 34% in Q3 2012 due to a revenue mix shift toward our Integrated Solutions segment. Research and development expenses were $1.7 million in Q3 2012, an increase from $904,000 in Q3 2011.

GAAP EPS was $0.01 in Q3 2012 on a fully diluted basis versus $0.00 in Q3 2011. Amortization associated with acquisition-related intangibles reduced Q3 2012 EPS by approximately $0.10 per share on an after tax basis versus a reduction of $0.08 per share in Q3 2011. Adjusted EBITDA (as described below) for Q3 2012 was $7.8 million, compared to $5.4 million in Q3 2011. Adjusted EBITDA margin as a percentage of revenue rose to 13.5% in Q3 2012 versus 10.1% in Q3 2011.

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

September
30, 2012
Three months
ended

September
30, 2011
Nine months
ended

September
30, 2012
Nine months
ended

September
30, 2011
(Unaudited and in thousands)
Net Income $ 341 $ 105 $ 835 $ 218
EBITDA Adjustments
Depreciation 1,085 612 3,140 1,139
Intangible Amortization 4,869 3,573 14,607 8,106
Stock Compensation
Amortization 722 671 2,068 2,169
Acquisition and Equity
Offering Costs 338 232 386 449
Interest Expense, net 418 322 1,284 543
Tax (Benefit) Expense, net (13) (90) 253 (15)
Adjusted EBITDA $ 7,760 $ 5,425 $ 22,573 $ 12,609

The KEYW Holding Corporation Financial Highlights
Condensed Consolidated Statements of Operations
(in thousands except share and per share amounts)
Three months ended Three months ended Nine months ended Nine months ended
September
30, 2012
September
30, 2011
September
30, 2012
September
30, 2011
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Revenues
Services $ 39,665 $ 40,793 $ 118,596 $ 121,978
Integrated Solutions 17,688 13,164 50,688 18,538
Total 57,353 53,957 169,284 140,516
Costs of Revenues
Services 28,634 30,180 85,623 87,816
Integrated Solutions 9,232 8,628 26,312 12,273
Total 37,866 38,808 111,935 100,089
Gross Profit
Services 11,031 10,613 32,973 34,162
Integrated Solutions 8,456 4,536 24,376 6,265
Total 19,487 15,149 57,349 40,427
Operating Expenses
Operating expenses 13,914 11,231 40,415 31,561
Intangible amortization expense 4,869 3,573 14,607 8,106
Total 18,783 14,804 55,022 39,667
Operating Income 704 345 2,327 760
Non-Operating Expense, net 376 330 1,239 557
Income before Income Taxes 328 15 1,088 203
Income Tax (Benefit) Expense, net (13) (90) 253 (15)
Net Income $ 341 $ 105 $ 835 $ 218
Weighted Average Common Shares Outstanding
Basic 25,883,556 26,169,829 25,744,453 25,944,264
Diluted 29,357,193 29,061,409 28,548,768 29,140,838
Earnings per Share
Basic $ 0.01 $ 0.00 $ 0.03 $ 0.01
Diluted $ 0.01 $ 0.00 $ 0.03 $ 0.01

Condensed Consolidated Balance Sheet
(in thousands except share amounts)
September 30, December 31,
2012 2011
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 52,164 $ 1,294
Receivables 45,892 40,630
Inventories, net 9,066 7,242
Prepaid expenses 2,349 2,511
Income tax receivable 27 27
Deferred tax asset, current 1,193 1,193
Total current assets 110,691 52,897
Property and equipment, net 15,459 8,707
Goodwill 164,466 164,466
Other intangibles, net 24,395 39,002
Deferred tax asset 4,737 2,348
Other assets 47 211
TOTAL ASSETS $ 319,795 $ 267,631
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,412 $ 4,136
Accrued expenses 7,953 4,370
Accrued salaries & wages 12,424 9,644
Revolver 0 49,500
Deferred income taxes 1,591 1,591
Total current liabilities 25,380 69,241
Long-term liabilities:
Non-current deferred tax liability 15,168 17,430
Other non-current liabilities 3,812 301
TOTAL LIABILITIES 44,360 86,972
Commitments and contingencies 0 0
Stockholders' equity:
Preferred stock, $0.001 par value; 5 million shares authorized, none issued 0 0
Common stock, $0.001 par value; 100 million shares authorized, 34,160,790 and 25,770,795 shares issued and outstanding
34
26
Additional paid-in capital 267,304 173,371
Retained earnings 8,097 7,262
Total stockholders' equity 275,435 180,659
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$ 319,795

$ 267,631

Condensed Consolidated Statements of Cash Flows
(in thousands)
Nine months ended
September 30, 2012
Nine months ended
September 30, 2011
(Unaudited) (Unaudited)
Net income $ 835 $ 218
Adjustments to reconcile net income to net cash provided by operating activities:
Stock compensation 2,068 2,169
Depreciation/Amortization 17,747 9,245
Deferred taxes (2,389) (561)
Changes in operating assets and liabilities:
Receivables (5,262) (2,193)
Inventory (1,824) (1,388)
Prepaid expenses 162 1,112
Accounts payable (724) (1,849)
Accrued expenses 3,643 (2,965)
Other balance sheet changes 163 272
Net cash provided by operating activities 14,419 4,060
Cash flows from investing activities:
Acquisitions, net of cash acquired 0 (55,213)
Purchases of property and equipment (5,922) (1,954)
Net cash used in investing activities (5,922) (57,167)
Cash flows from financing activities:
Proceeds from stock issuance, net 94,451 0
Proceeds from revolver, net (49,500) 49,000
Repurchase of stock (2,948) 0
Proceeds from option and warrant exercises 370 693
Net cash provided by financing activities 42,373 49,693
Net increase (decrease) in cash and cash equivalents 50,870 (3,414)
Cash and cash equivalents at beginning of period 1,294 5,795
Cash and cash equivalents at end of period $ 52,164 $ 2,381
Supplemental disclosure of cash flow information:
Cash paid for interest $ 1,304 $ 342
Cash paid for taxes $ 4,227 $ 93

As a result of the recent severe weather impact on the northeastern United States, KEYW will not be holding a conference call to discuss these results. KEYW will resume its normal practice of hosting a conference call for investors when it reports its Q4 2012 results early in 2013.

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, 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 15, 2012 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 443-733-1600Source:KEYW Corp.