KeyW Corporation
Nov 2, 2010

KEYW Third Quarter 2010 Financial Results

HANOVER, Md., Nov. 2, 2010 (GLOBE NEWSWIRE) -- The KEYW Holding Corporation (NASDAQ: KEYW) announces revenue for the three month period ended September 30, 2010 of $29.0 million as compared to $10.0 million in the same period of 2009, an increase of approximately 288%. Net Income was $4.4 million and net loss was ($1.7) million for the three month periods ended September 30, 2010 and September 30, 2009, respectively. Earnings Per Share (EPS) were $0.24 (diluted) for Q3 2010 versus EPS for the same period in 2009 of $(0.12) (diluted). Income Before Income Taxes for the three month period ended September 30, 2010 was $7.5 million compared to Loss Before Income Taxes of $(2.4) million for the same period of 2009.

For the first nine months of 2010, KEYW generated $78.7 million in revenue versus $26.9 million in the same period of 2009. Net income was $9.7 million and net loss was $(2.5) million for the nine month periods ended September 30, 2010 and September 30, 2009, respectively. EPS for these same periods were $0.54 (diluted) in 2010 and $(0.19) (diluted) in 2009. KEYW is projecting Q4 2010 revenue to be approximately $31.0 million, on an actual basis and without the benefit of any acquisitions. The projected revenue is based on a number of assumptions that KEYW believes are reasonable at the time of this press release. Information regarding potential risks that could cause the actual results to differ from this forward-looking statement is set forth below and in KEYW's filings with the Securities and Exchange Commission.

 "I am pleased to begin our quarterly reporting of financial results with this release of Q3 2010, showing strong growth in both revenue and net income over Q3 2009", commented Leonard Moodispaw, CEO and President of KEYW Corporation. "Our results are in line with our projections and position us to deliver a strong 2010. Our strategic platform has grown significantly in the past year and we feel we are well positioned to continue our record of strong growth in 2011."

There have been two important events, subsequent to the end of Q3 2010. First was the completion of our Initial Public Offering. KEYW began trading on the NASDAQ Global Market on October 1, 2010, having raised approximately $89.4 million in this offering, after underwriter fees but before expenses. Subsequent to the IPO, KEYW paid in full the subordinated debt under the TAG seller notes and the debt issued to its Board members and shareholders in March-April 2010, as required under the terms of such debt, and paid down the Bank of America revolver to $0. Immediately after the debt payments, KEYW had approximately $59 million of cash on hand including net proceeds from the IPO.

The second event is our agreement in principle to acquire Sycamore US, our 8th acquisition since founding in 2008 and will be our first acquisition since going public. This acquisition is expected to close during November 2010, and is expected to be immediately accretive.

KEYW Adjusted EBITDA for Q3 2010 was $2.2 million, resulting in an Adjusted EBITDA margin of 7.5%. For the nine months ended September 30, 2010, our Adjusted EBITDA was $6.5 million and the Adjusted EBITDA margin was 8.3%. 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, and 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:

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  Nine Months Ended
  September 30, 2010  September 30, 2010
 (in thousands) (in thousands)
 (unaudited) (unaudited)
    
Net Income $ 4,408  $ 9,748
Depreciation 213  534
Amortization  1,693  4,454
Other expenses (1) 497  1,574
Acquisition accounting (2) (8,700)  (18,350)
Interest expense, net 1,005  1,677
Taxes 3,063  6,866
    
Adjusted EBITDA $ 2,179  $  6,503
(1) Includes costs associated with our Initial Public Offering, acquisitions,
and financing costs.
   
(2) Includes the earn-out accounting adjustments related to the TAG acquisition
and the earn-back of purchase price from the LEDS acquisition.
   

In addition to these traditional financial metrics, we believe that our total number of KEYW employees and the total number of Staffed Positions, which includes personnel provided under subcontract to KEYW for performance on KEYW contracts, will provide investors with insight into our business and growth. At the close of Q3 2010, we had 453 employees and a total number of Staffed Positions of 442. These figures provide a baseline for these metrics which we plan to update on a quarterly basis.

The KEYW Holding Corporation Financial Highlights

(in thousands except share and per share amounts)

     Three Months Ended Nine Months Ended
    September 30, September 30, September 30,  September 30,
    2010 2009 2010 2009
     (unaudited) (unaudited) (unaudited) (unaudited)
Revenue          
  Services   $ 25,227  $ 8,212  $ 67,926  $ 22,468
  Products   3,765  1,846  10,725  4,474
  Total   28,992  10,058  78,651  26,942
           
Cost of Revenue         
  Services   18,243  6,090  49,377  16,513
  Products   2,317  1,578  6,254  3,188
  Total   20,560  7,668  55,631  19,701
           
Gross Profit         
  Services   6,984  2,122  18,549  5,955
  Products   1,448  268  4,471  1,286
  Total   8,432  2,390  23,020  7,241
           
Operating expenses   7,028  4,307  18,648  8,046
Intangible amortization expense  1,693  520  4,454  1,461
Loss from operations  (289)  (2,437)  (82)  (2,266)
           
Interest Expense(income), net  1,005  --   1,677  (100)
Other non-operating (income)expense, net  (8,765)  (76)  (18,373)  872
Total non-operating (income)expense, net  (7,760)  (76)  (16,696)  772
           
Income(Loss) before provision for income taxes  7,471  (2,361)  16,614  (3,038)
           
Income tax (expense)benefit  (3,063)  652  (6,866)  546
           
Net Income(Loss)    $ 4,408   $ (1,709)  $ 9,748   $ (2,492)
            
Weighted average common shares outstanding:        
  Basic   15,531,332  13,940,176  15,174,140  13,023,080
  Fully Diluted   18,443,699  13,940,176  18,176,841  13,023,080
           
Basic and diluted earnings per share        
  Basic  $ 0.28 $  (0.12) $ 0.64 $  (0.19)
  Fully Diluted  $ 0.24 $  (0.12) $ 0.54 $  (0.19)
           
Condensed Consolidated Balance Sheet   
(in thousands except share amounts)  
   
ASSETSSeptember 30,December 31,
 20102009
Current assets: (unaudited)  
Cash and cash equivalents $ 1,259 $ 7,333
Receivables, net 21,844 9,409
Inventories 4,635 4,334
Prepaid expenses  1,378 1,240
Income tax receivable 223 223
Total current assets 29,339 22,539
   
Property and equipment, net 2,858 1,430
Goodwill 92,045 34,927
Other intangibles, net 14,114 6,314
Deferred tax asset 1,892 1,892
Other assets 191 28
TOTAL ASSETS$ 140,439 $ 67,130
   
LIABILITIES AND STOCKHOLDERS' EQUITY  
Current liabilities:  
Accounts payable $ 4,539 $ 442
Accrued expenses 1,615 435
Accrued salaries & wages 4,721 2,214
Revolver 10,500 -- 
Short-term subordinated debt 11,001 -- 
Income taxes payable --  -- 
Deferred income taxes 83 83
Long-term liabilities:  
Long-term subordinated debt 8,672 -- 
Non-current deferred tax liability 8,613 1,564
Other non-current liabilities 141 53
Accrued earn-out 10,000 -- 
TOTAL LIABILITIES 59,885 4,791
   
Commitments and contingencies   
   
Stockholders' equity:  
Preferred stock, $0.001 par value; 5,000,000 shares
authorized, none issued
 --  -- 
Common stock, $0.001 par value; 100,000,000 shares
authorized, 15,537,198 and 14,187,520 issued and outstanding
 16 14
Additional paid-in capital 74,969 66,504
Retained earnings/(Accumulated deficit) 5,569 (4,179)
Accumulated other comprehensive income  -- 
Total stockholders' equity 80,554 62,339
   
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY$ 140,439 $ 67,130
   
Condensed Consolidated Statements of Cash Flows

(in thousands)

  
   
 September 30,September 30,
 20102009
  (unaudited) (unaudited)
Net income $ 9,748  $ (2,492)
Adjustments to reconcile net loss to net  
Cash used in operating activities  
Stock compensation 1,068 127
Depreciation/Amortization 4,988 1,675
Warrant accounting --  823
Loss on disposal of equipment 10 -- 
Non-cash interest expense 1,006 -- 
Non-cash impact of TAG earn-out reduction (17,750) -- 
Deferred taxes 7,049 370
Decrease (increase) in balance sheet items  
Receivables (6,333) (3,186)
Inventory (301) (1,983)
Prepaid expenses (542) (285)
Accounts payable (1,284) 56
Accrued expenses 2,114 1,443
Other balance sheet changes (126) (866)
Net cash used in operations (353) (4,318)
   
   
Cash flows from investing activities  
Acquisitions, net of cash acquired (27,629) (3,241)
Purchase of property and equipment (1,470) (937)
Proceeds from the sale of equipment 128 4
Net cash used in investing activities (28,971) (4,174)
   
   
   
Cash flows from financing activities  
Proceeds from stock issuances --  29,397
Proceeds from revolver, net 10,500 -- 
Proceeds from subordinated debt 8,250 -- 
Proceeds from warrant exercise 4,500 -- 
Net cash provided by financing activities23,250 29,397
   
Net decrease in cash and cash equivalents (6,074) 20,905
Cash and cash equivalents at beginning of period7,333 5,397
Cash and cash equivalents at end of period$ 1,259 $ 26,302

KEYW has scheduled a conference call to discuss these results today at 4:30 pm (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 408-940-3868.

An archive of the Webcast will be available on our webpage following the call. In addition, a dial-up replay of the call will be available at approximately 7:00 p.m. (EDT) today (November 2nd), and will remain available through December 2, 2010. To access the dial-up replay, call 1-800-642-1687, Conference ID 21051399. 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 dial-up replay. International callers may access the replay by calling 706-645-9291 with the same passcode.

About KEYW: KEYW provides agile cyber superiority and cybersecurity solutions, primarily for U.S. Government intelligence and defense customers. 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, 1334 Ashton Road, Hanover, Maryland 21076; Phone 443-270-5300; Fax 443-270-5301; 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," and similar expressions, including statements regarding our projected revenues, statements that our results position us to deliver a strong 2010 and that we are well positioned to continue our record of strong growth in 2011, statements regarding the expected closing date and accretive value of our acquisition of Sycamore US, and statements that the total number of personnel and Staffed Positions provide insight into our business and growth. 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 prospectus, dated September 30, 2010 and filed with the Securities and Exchange Commission (SEC) on October 1, 2010 pursuant to Rule 424(b)(4) under the Securities Act of 1933, 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:  KEYW 
Corporation
          Ed Jaehne, Chief Strategy Officer
          443-270-5300

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