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KEYW Reports Q1 2013 Financial Results

HANOVER, Md., April 30, 2013 (GLOBE NEWSWIRE) -- The KEYW Holding Corporation (Nasdaq:KEYW) today announced financial results for its first quarter ended March 31, 2013. First quarter 2013 revenue was $77.9 million, an increase of 40% versus the first quarter 2012. First quarter 2013 GAAP loss per share was $0.06 versus earnings per share of $0.01 in first quarter 2012. Non-cash amortization associated with acquisition related intangibles reduced Q1 2013 EPS by $0.11. Adjusted EBITDA (as described below) for Q1 2013 was $6.8 million or 8.7% of Q1 2013 revenue. In Q1 2013, KEYW received new funding actions totaling more than $90 million in value and ended the quarter with 1,137 employees.

"KEYW is off to a strong start in 2013 despite the uncertainties presented by the current government budget turmoil. We continue to invest in accelerating our commercial product efforts which, as noted below, also contributed to higher operating expenses," commented Leonard Moodispaw, CEO and President of KEYW. "Year to date, we have added 23 new hires to our commercial business and we now have 65 full-time staff members, including Chris Fedde, the former CEO of SafeNet, Inc. who will provide valuable guidance to both our government and commercial products businesses (see our press release also dated April 30, 2013 for additional details). 'Project G' is being installed in customer networks in Q2 2013; we are pleased to be bringing this transformational capability to market."

As mentioned, revenue for Q1 2013 increased 40% versus Q1 2012 from $55.8 million to $77.9 million. The main drivers for the increase were the Q4 2012 acquisitions of Poole & Associates and Sensage and organic growth in both segments. Consolidated gross margin decreased from 34% in Q1 2012 to 31% in Q1 2013 due to the acquisition of Poole, which generated a significant portion of revenue through the use of lower margin subcontractors. Operating expenses increased $6.8 million versus Q1 2012 and increased as a percentage of revenue from 24% in Q1 2012 to 26% in Q1 2013. The increase was due primarily to increased investment in our commercial cyber product efforts, higher facilities costs and higher stock compensation expenses.

GAAP loss per share was $0.06 in Q1 2013 on a fully diluted basis versus earnings per share of $0.01 in Q1 2012. Adjusted EBITDA (as described below) for Q1 2013 was $6.8 million, compared to $7.2 million in Q1 2012. Adjusted EBITDA margin as a percentage of revenue decreased to 8.7% in Q1 2013 versus 12.9% in Q1 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
March 31, 2013
(in thousands)
Three Months
Ended
March 31, 2012
(in thousands)
Net (Loss) Income $ (2,262) $ 168
Depreciation 1,345 1,028
Amortization 6,921 4,869
Stock amortization 1,287 647
Acquisition accounting (1) 144(2) 24
Interest expense, net 914 417
Tax expense (benefit) (1,536) 66
Adjusted EBITDA $ 6,813 $ 7,219
(1) Includes costs associated with acquisitions and related financing (excluding interest which is disclosed separately).
(2) Includes non-cash gain associated with the write-down of the earn-out from the National Semiconductor asset purchase.
The KEYW Holding Corporation Financial Highlights
Condensed Consolidated Statements of Operations
(in thousands except share and per share amounts)
Three months
ended
March 31, 2013
(Unaudited)
Three months
ended
March 31, 2012
(Unaudited)
Revenues
Services $ 58,843 $ 39,855
Integrated Solutions 19,029 15,921
Total 77,872 55,776
Costs of Revenues, excluding amortization
Services 44,408 28,877
Integrated Solutions 9,402 7,970
Total 53,810 36,847
Gross Profit
Services 14,435 10,978
Integrated Solutions 9,627 7,951
Total 24,062 18,929
Operating Expenses
Operating expenses 20,233 13,412
Intangible amortization expense 6,921 4,869
Total 27,154 18,281
Operating (Loss) Income (3,092) 648
Non-Operating Expense, net 706 414
(Loss) Income before Income Taxes (3,798) 234
Income Tax (Benefit) Expense, net (1,536) 66
Net (Loss) Income $ (2,262) $ 168
Weighted Average Common Shares Outstanding
Basic 36,378,929 25,811,983
Diluted 36,378,929 27,766,772
Earnings (Loss) per Share
Basic $ (0.06) $ 0.01
Diluted $ (0.06) $ 0.01
Condensed Consolidated Balance Sheet
(in thousands except share amounts)
March 31,
2013
December 31,
2012
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 3,067 $ 5,639
Receivables 59,732 58,482
Inventories, net 9,246 8,739
Prepaid expenses 1,958 1,880
Income tax receivable 2,996 96
Deferred tax asset, current 3,149 3,149
Total current assets 80,148 77,985
Property and equipment, net 25,966 23,860
Goodwill 296,513 290,861
Other intangibles, net 48,024 53,799
Deferred tax asset 14,329 13,608
Other assets 2,526 2,562
TOTAL ASSETS $ 467,506 $ 462,675
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Revolver $ 29,000 $ 21,000
Accounts payable 9,494 7,254
Accrued expenses 7,364 5,488
Accrued salaries & wages 10,709 17,770
Term note — current portion 6,125 5,688
Deferred revenue 2,900 2,905
Deferred income taxes 1,429 1,429
Total current liabilities 67,021 61,534
Long-term liabilities:
Term note — non-current portion 61,250 63,000
Non-current deferred tax liability 28,886 29,700
Other non-current liabilities 7,563 7,413
TOTAL LIABILITIES 164,720 161,647
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, 36,583,867 and 36,135,542 shares issued and outstanding 37 36
Additional paid-in capital 296,734 292,715
Retained earnings 6,015 8,277
Total stockholders' equity 302,786 301,028
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 467,506 $ 462,675
Condensed Consolidated Statements of Cash Flows
(in thousands)
Three months
ended March 31,
2013
Three months
ended March 31,
2012
(Unaudited) (Unaudited)
Net (loss) income $ (2,262) $ 168
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:
Stock compensation 1,287 647
Depreciation/Amortization 8,266 5,897
Non-cash impact of TI earn-out reduction (146) --
Deferred taxes (721) --
Changes in operating assets and liabilities:
Receivables (947) (10,430)
Inventory 70 (886)
Prepaid expenses (63) (721)
Income tax receivable (2,900) --
Accounts payable 1,675 (717)
Accrued expenses (4,154) (822)
Other balance sheet changes 37 (7)
Net cash provided by (used in) operating activities 142 (6,871)
Cash flows from investing activities:
Acquisitions, net of cash acquired (6,725) --
Purchase of property and equipment (2,108) (1,431)
Capitalized software development costs (1,273) --
Net cash used in investing activities (10,106) (1,431)
Cash flows from financing activities:
Proceeds from revolver, net 8,000 11,000
Repayment of debt (1,313) --
Repurchase of Stock -- (2,948)
Proceeds from option exercises 705 51
Net cash provided by financing activities 7,392 8,103
Net decrease in cash and cash equivalents (2,572) (199)
Cash and cash equivalents at beginning of period 5,639 1,294
Cash and cash equivalents at end of period $ 3,067 $ 1,095

A conference call has been scheduled to discuss these results on April 30 at 5:00 p.m. (EDT). At that time, management will review the company's first quarter 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 Investors page on our website, http://investors.keywcorp.com on April 30, 2013. 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 this event is 45277108.

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 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 443-733-1600Source:KEYW Corp.