KeyW Corporation
Jul 31, 2012

KEYW Reports Q2 2012 Financial Results

HANOVER, Md., July 31, 2012 (GLOBE NEWSWIRE) -- The KEYW Holding Corporation (Nasdaq:KEYW) announces Q2 2012 revenue of $56.2 million, an increase of 25% versus Q2 2011. GAAP earnings per share (EPS) were $0.01 in Q2 2012 on a fully diluted basis, versus $0.00 in Q2 2011. Amortization associated with acquisition-related intangibles reduced Q2 2012 EPS by approximately $0.11 per share on an after tax basis versus a reduction of $0.05 in Q2 2011. Adjusted EBITDA (as described below) for Q2 2012 was $7.6 million, compared to $3.9 million in Q2 2011. As a percentage of revenue, Adjusted EBITDA margin rose to 13.5% in Q2 2012, an increase from 8.6% in Q2 2011 and 12.9% in Q1 2012. Net cash provided from operations in Q2 2012 was a strong $10 million despite R&D spending of $1.6 million in the quarter. In Q2 2012, KEYW was awarded work totaling $42 million in contract value.

"For KEYW, Q2 2012 was about continuing to deliver results," commented Leonard Moodispaw, CEO and President of KEYW.  "We delivered on growth, revenue and EBITDA while continuing to invest in key R&D initiatives, including Project G.  While many in our industry are fretting over budgets and contracts, KEYW continues to see unparalleled demand for the talent and solutions for which we are known throughout the Intelligence Community.  During this quarter we celebrated the opening of our new Corporate headquarters, significantly expanding our facilities as we continue to scale KEYW to meet our customers' needs.  At mid-year, 2012 is on target to be a strong year for KEYW."   

Revenue for Q2 2012 increased 25% versus Q2 2011 from $44.9 million to $56.2 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. Consolidated gross margin increased from 29% in Q2 2011 to 34% in Q2 2012 due to a revenue mix shift toward our Integrated Solutions segment. Research and development expenses were $1.6 million in Q2 2012, an increase from $660,000 in Q2 2011 and $837,000 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:

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.

 

 Six months ended
June 30, 2012
Six months ended
June 30, 2011
Three months ended
June 30, 2012
Three months ended
June 30, 2011
  (Unaudited and in thousands)
         
Net Income $ 493 $ 112 $ 325 $ 49
         
Depreciation  2,059  527  1,032  272
         
Intangible Amortization  9,738  4,533  4,869  2,465
         
Acquisition and IPO Costs  47  218  24  162
         
Stock Compensation
  
       
Amortization 1,346 1,498 698 742
         
Interest Expense (Income)  873  221  456  198
         
Tax Expense  266  74  200  (16)
         
Adjusted EBITDA $ 14,822 $ 7,183 $ 7,604 $ 3,872
         

In addition to these traditional financial metrics, we believe the total number of KEYW employees provides investors with insight into our business and growth. At the close of Q2 2012, we had 864 employees, approximately 70% of whom hold the highest level clearances.


 

The KEYW Holding Corporation Financial Highlights
Condensed Consolidated Statements of Operations
(in thousands except share and per share amounts)
     
     
 Three months endedThree months endedSix months endedSix months ended
 June 30, 2012June 30, 2011June 30, 2012June 30, 2011
  (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Revenues        
 Services  $ 39,076  $ 42,558  $ 78,931  $ 81,184
 Integrated Solutions  17,079  2,340  33,000  5,375
 Total  56,155  44,898  111,931  86,559
         
Costs of Revenues        
 Services  28,113  30,277  56,990  57,636
 Integrated Solutions  9,109  1,584  17,079  3,646
 Total  37,222  31,861  74,069  61,282
         
Gross Profit        
 Services  10,963  12,281  21,941  23,548
 Integrated Solutions  7,970  756  15,921  1,729
 Total  18,933  13,037  37,862  25,277
         
Operating Expenses        
 Operating expenses  13,089  10,333  26,501  20,330
 Intangible amortization  expense  
 4,869
 
 2,465
 
 9,738
 
 4,533
 Total  17,958  12,798  36,239  24,863
         
Operating Income  975  239  1,623  414
         
Non-Operating Expense net  450  206  864  228
         
Income before Income Taxes  525  33  759  186
         
Income Tax (Expense) Benefit, net  (200)  16  (266)  (74)
         
Net Income  $ 325  $ 49  $ 493  $ 112
         
Weighted Average Common Shares Outstanding        
Basic 25,553,097 26,058,260 25,679,720 25,832,176
Diluted 28,353,011 29,301,790 28,085,331 29,243,975
         
Earnings per Share        
Basic  $0.01  $0.00  $0.02  $0.00
Diluted  $0.01  $0.00  $0.02  $0.00
         

 

 

Condensed Consolidated Balance Sheet
(in thousands except share amounts)
   
 June 30,December 31,
 20122011
  (Unaudited)  
 ASSETS    
Current assets:    
 Cash and cash equivalents  $ 234  $ 1,294
 Receivables  51,196  40,630
 Inventories, net  8,676  7,242
 Prepaid expenses  2,973  2,511
 Income tax receivable  27  27
 Deferred tax asset, current  1,193  1,193
 Total current assets  64,299  52,897
     
Property and equipment, net  14,759  8,707
Goodwill  164,466  164,466
Other intangibles, net  29,264  39,002
Deferred tax asset  2,348  2,348
Other assets  212  211
TOTAL ASSETS $ 275,348 $ 267,631
     
 LIABILITIES AND SHAREHOLDERS' EQUITY    
Current liabilities:    
 Accounts payable  $ 4,706 $ 4,136
 Accrued expenses  4,611  4,370
 Accrued salaries & wages  12,640  9,644
 Revolver  52,200  49,500
 Deferred income taxes  1,591  1,591
 Total current liabilities  75,748  69,241
     
Long-term liabilities:    
 Non-current deferred tax liability  15,977  17,430
 Other non-current liabilities  3,851  301
TOTAL LIABILITIES  95,576  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, 25,569,243 and 25,770,795 shares issued and  outstanding  
 
 26
 
 
 26
 Additional paid-in capital  171,991  173,371
 Retained earnings  7,755  7,262
 Total stockholders' equity  179,772  180,659
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 
 $ 275,348
 
 $ 267,631
     

 

 

Condensed Consolidated Statements of Cash Flows
(in thousands)
   
 Six months ended June 30, 2012Six months ended June 30, 2011
  (Unaudited) (Unaudited)
Net income  $ 493  $ 112
Adjustments to reconcile net income to net cash provided by (used in) operating activities:    
Stock compensation  1,346  1,498
Depreciation/Amortization   11,797  5,060
Deferred taxes  0  (223)
Changes in operating assets and liabilities:    
Receivables  (10,566)  (4,044)
Inventory  (1,434)  (1,669)
Prepaid expenses  (462)  (2,623)
Accounts payable  570  253
Accrued expenses  1,363  (4,611)
Other balance sheet changes  0  304
Net cash provided by (used in) operating activities  3,107  (5,943)
     
Cash flows from investing activities:    
Acquisitions, net of cash acquired  0  (25,460)
Purchases of property and equipment  (4,141)  (479)
Net cash used in investing activities  (4,141)  (25,939)
     
Cash flows from financing activities:    
Proceeds from revolver, net  2,700  29,000
Repurchase of Stock  (2,948)  0
Proceeds from option and warrant exercises  222  590
Net cash (used in) provided by financing activities  (26)  29,590
     
Net decrease in cash and cash equivalents  (1,060)  (2,292)
Cash and cash equivalents at beginning of period  1,294  5,795
Cash and cash equivalents at end of period  $ 234  $ 3,503
     
Supplemental disclosure of cash flow information:    
Cash paid for interest  $ 878  $ 144
Cash paid for taxes  $ 2,791  $ 93
     

Pro Forma Revenue Reconciliation

The table below is provided to allow investors to compare reported year-to-date 2012 revenue to unaudited pro forma revenue for the six-month period ended June 30, 2011, assuming these acquisitions had been completed on the first day of the year. Pro forma revenue is not presented for 2012 as there have been no acquisitions during 2012.  The 2011 activity for JKA, FASI and FLD includes the financial activity in 2011 prior to acquisition. Activity for the National Semiconductor asset purchase is not included for any period presented due to its immateriality. The total pro forma revenue in the tables below is a Non-GAAP measurement which includes KEYW's reported revenues and the revenues of acquisitions prior to being acquired by KEYW.  

 For Six Months ended June 30, 2011 (In Thousands and Unaudited)
 JKAFASIFLDKEYWTotal
Revenue  $ 3,381  $ 3,903  $ 13,717 $ 86,559  $ 107,560

The table below summarizes the unaudited pro forma statement of operations for the second quarter of 2011, assuming these acquisitions had been completed on the first day of the year.

 For Three Months ended June 30, 2011 (In Thousands and Unaudited)
 FASIFLDKEYWTotal
Revenue  $ 968 $ 6,027 $ 44,898  $ 51,893


KEYW has scheduled a conference call to discuss these results today, July 31, 2012, 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.

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) on July 31, 2012, and will remain available through August 31, 2012. To access the dial-up replay, call 1-855-859-2056, Conference ID 72084099. 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 1-404-537-3406, with the same Conference ID.

About KEYW

KEYW provides agile cyber superiority, cybersecurity, and geospatial intelligence 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, 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

         443-733-1600