KeyW Corporation
Feb 4, 2014

KEYW Reports Q4 and 2013 Financial Results

HANOVER, Md., Feb. 4, 2014 (GLOBE NEWSWIRE) -- The KEYW Holding Corporation (Nasdaq:KEYW) announces full year revenue for 2013 of $298.7 million versus full year revenue for 2012 of $243.5 million, an increase of 23%. Net loss for 2013 was $10.6 million versus net income of $1.0 million in 2012. Net loss for 2013 included a one-time $4.8 million after tax litigation settlement charge. Fully diluted GAAP loss per share in 2013 was $0.29. Excluding the litigation settlement charge, our loss per share would have been $0.16 for 2013 as compared to fully diluted GAAP earnings per share of $0.03 in 2012. Amortization associated with acquisition related intangibles further reduced 2013 earnings per share by $0.40. Adjusted EBITDA (as described below) for 2013 was $27.2 million, or 9.1% of 2013 revenue.

For the fourth quarter of 2013, revenue was $68.8 million and fully diluted loss per share was $0.01. Fourth quarter adjusted EBITDA was $7.0 million in the fourth quarter of 2013, or 10.2% of revenue, versus $10.4 million in the fourth quarter of 2012, or 14% of revenue. During the fourth quarter, KEYW received $110 million in funding actions and ended the year with 1,068 employees.

By reporting segment, KEYW's Government segment generated $38.3 million in adjusted EBITDA during the full year 2013, or 13.2% of Government revenue, versus $32.2 million in the full year 2012, or 13.4% of revenue. Adjusted EBITDA was a loss of $11.1 million in KEYW's Commercial Cyber Solutions segment in the full year 2013 versus positive adjusted EBITDA of $0.7 million in the full year 2012. For the fourth quarter of 2013, KEYW's Government segment generated $11.0 million in adjusted EBITDA, or 16.8% of Government revenue, versus $9.7 million in the fourth quarter 2012, or 13.6% of Government revenue. Adjusted EBITDA was a loss of $4.0 million in KEYW's Commercial Cyber Solutions segment in the fourth quarter of 2013 versus positive adjusted EBITDA of $0.7 in the fourth quarter 2012.

"KEYW made significant progress in 2013 with the official launch of Hexis Cyber Solutions, Inc. and commercial release of the HawkEye G product in the fourth quarter of 2013. We are converting our beta customers into commercial customers and have built a substantial pipeline of near-term customers. We made a significant investment in commercial infrastructure in 2013 thus impacting EBITDA." commented Len Moodispaw, CEO and President of KEYW Corporation. "In the Government business, KEYW was awarded several new large contract vehicles in 2013, but there is no doubt the impacts of sequestration and the government shutdown took a toll on the company. Our government customers now have a budget in place that addresses sequestration and we expect to begin seeing a return to a more normal environment in 2014."

As mentioned, revenue for the fourth quarter of 2013 was $68.8 million, a decrease of 7% versus the fourth quarter of 2012. The decrease was driven by the impact of sequestration and the fourth quarter 2013 government shutdown.   Fully diluted GAAP loss per share in the fourth quarter of 2013 was $0.01. Amortization of acquisition related intangibles reduced fourth quarter earnings per share by approximately $0.09 per share.

In the fourth quarter of 2013, management evaluated KEYW's segment disclosure as a result of the increasing importance of our commercial cybersecurity group and the changing mix of our government contracting business. Based on this evaluation, we are changing our reporting segments from the previously identified Services and Integrated Solutions segments to Government and Commercial Cyber Solutions segments. The Commercial Cyber Solutions group had been part of Integrated Solutions, beginning with the acquisition of Sensage, Inc. in the fourth quarter of 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.

 Three Three     
 months months     
 ended ended Year ended Year ended 
 DecemberDecember December December 
  31, 201331, 201231, 201331, 2012
  (Unaudited and in thousands)
Net (Loss) Income $(510) $180 $(10,634) $1,015
         
Depreciation 1,698 1,229 6,009 4,369
         
Intangible Amortization 5,663 6,804 24,658 21,411
         
Public Offering, Acquisition and
Other Nonrecurring (Benefits) Costs
(164) 552 6,913 938
         
Stock Compensation Amortization  1,418 956 5,731 3,024
         
Interest Expense 832 1,017 3,508 2,307
         
Tax Benefit (1,925) (338) (9,005) (86)
         
Adjusted EBITDA $7,012 $10,400 $27,180 $32,978
         
 
THE KEYW HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
         
 Three months Three months     
 ended ended Year ended Year ended 
 December 31, December 31, December 31, December 31, 
 2013201220132012
  (Unaudited)    
Revenues        
Government Solutions $65,482 $70,962 $288,909 $240,245
Commercial Cyber Solutions 3,346 3,275 9,823 3,275
Total 68,828 74,237 298,732 243,520
         
Costs of Revenues        
Government Solutions 42,866 47,245 197,380 159,180
Commercial Cyber Solutions 540 547 1,840 547
Total 43,406 47,792 199,220 159,727
         
Gross Profit        
Government Solutions 22,616 23,717 91,529 81,065
Commercial Cyber Solutions 2,806 2,728 7,983 2,728
Total 25,422 26,445 99,512 83,793
         
Operating Expenses        
Operating expenses 21,296 18,775 84,701 59,189
Intangible amortization expense 5,663 6,804 24,658 21,411
Total 26,959 25,579 109,359 80,600
         
Operating (Loss) Income (1,537) 866 (9,847) 3,193
         
Non-Operating Expense, net 898 1,024 9,792 2,264
         
(Loss) Income before Income Taxes (2,435) (158) (19,639) 929
         
Income Tax Benefit, net (1,925) (338) (9,005) (86)
         
Net (Loss) Income $(510) $180 $(10,634) $1,015
         
Weighted Average Common Shares Outstanding        
Basic 36,824,514 35,725,283 36,618,919 28,239,945
Diluted 36,824,514 38,836,329 36,618,919 31,152,924
         
(Loss) Earnings per Share        
Basic $(0.01) $0.01 $(0.29) $0.04
Diluted $(0.01) $0.00 $(0.29) $0.03
         
     
THE KEYW HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
     
 December 31, December 31, 
 20132012
ASSETS    
Current assets:    
Cash and cash equivalents $2,480 $5,639
Receivables 51,198 58,482
Inventories, net 11,305 8,739
Prepaid expenses 2,009 1,880
Income tax receivable -- 96
Deferred tax asset, current 2,556 3,149
Total current assets 69,548 77,985
     
Property and equipment, net 26,826 23,860
Goodwill 297,484 290,861
Other intangibles, net 29,343 53,799
Deferred tax assets 17,483 13,608
Other assets 3,038 2,562
TOTAL ASSETS$443,722 $462,675
     
LIABILITIES AND SHAREHOLDERS' EQUITY    
Current liabilities:    
Revolver $22,000 $21,000
Accounts payable 8,004 7,254
Accrued expenses 1,495 5,488
Accrued salaries & wages 11,948 17,770
Term note - current portion 7,000 5,688
Deferred revenue 2,745 2,905
Deferred income taxes 1,423 1,429
Total current liabilities 54,615 61,534
Long-term liabilities:    
Term note - non-current portion 56,000 63,000
Non-current deferred tax liabilities 25,578 29,700
Other non-current liabilities 7,292 7,413
TOTAL LIABILITIES 143,485 161,647
     
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, 36,925,730 and 36,135,542 shares issued and outstanding 37 36
Additional paid-in capital 302,557 292,715
Retained earnings (2,357) 8,277
Total stockholders' equity 300,237 301,028
     
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY$443,722 $462,675
     
     
THE KEYW HOLDING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
     
 Year ended Year ended 
 December 31, December 31, 
 20132012
     
Net (loss) income $(10,634) $1,015
Adjustments to reconcile net (loss) income to net cash provided by operating activities:    
Stock compensation 5,731 3,024
Depreciation/Amortization 30,667 25,780
Loss on disposal of equipment 20 87
Non-cash impact of TI earn-out reduction (146) --
Windfall tax benefit from option exercise (219) (140)
Deferred taxes (7,191) (1,864)
Decrease (increase) in balance sheet items:    
Receivables 7,587 (8,546)
Inventory (1,989) (1,313)
Prepaid expenses (114) 910
Income tax receivable 96 (69)
Accounts payable 184 (298)
Accrued expenses (8,395) (2,429)
Other balance sheet changes (477) (2,128)
Net cash provided by operating activities15,12014,029
     
Cash flows from investing activities:    
Acquisitions, net of cash acquired (6,751) (131,392)
Purchase of property and equipment (6,236) (9,174)
Capitalized software development costs (2,716) (1,547)
Proceeds from sale of equipment 28 --
Net cash used in investing activities(15,675)(142,113)
     
Cash flows from financing activities:    
Proceeds from stock issuances -- 94,451
Proceeds from term note -- 70,000
Proceeds from revolver 60,000 51,500
Repayment of debt (64,688) (81,312)
Repurchase of stock -- (2,948)
Windfall tax benefit from option exercise 219 140
Proceeds from option and warrant exercises 1,865 598
Net cash (used in) provided by financing activities(2,604)132,429
     
Net increase (decrease) in cash and cash equivalents (3,159) 4,345
Cash and cash equivalents at beginning of period 5,639 1,294
Cash and cash equivalents at end of period$2,480 $5,639
     

Pro Forma Revenue

The tables below summarize the unaudited pro forma statement of operations for the three and twelve months ended December 31, 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 year ended December 31, 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 Three Months ended December 31, 2012  
  (In Thousands and Unaudited)  
         
 SensageKEYWTotal  
Revenue $197 $74,237 $74,434  
   
   
 For Year ended December 31, 2012
 (In Thousands and Unaudited)
         
 PooleSensageKEYWTotal
Revenue $42,321 $6,820 $243,520 $292,661

A conference call has been scheduled to discuss these results on February 4, 2014 at 5:00 p.m. (EST). At that time, Management will review the Company's fourth quarter and full year 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 Investor page on our website, http://investors.keywcorp.com on February 4, 2014. 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 the event is 43264451.

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 expected 2014 revenue growth in our Commercial Cyber Solutions segment, statements about our expectations regarding the 2014 environment for our government customers, 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

         443-733-1600