HANOVER, Md., Aug. 01, 2018 (GLOBE NEWSWIRE) -- The KeyW Holding Corporation (NASDAQ: KEYW), a pure-play national security solutions provider for the Intelligence, Cyber and Counterterrorism Communities’ toughest challenges, today announced second-quarter 2018 financial and operating results.
CEO Commentary
“Our second-quarter results demonstrate KeyW’s ability to deliver outstanding value to our customers, generate strong financial performance and make good on our commitment to win our share of contract awards. I am extremely proud of our nearly 2,000 employees who are delivering superior value to our customers. I am particularly pleased with our solid year-to-date awards, strong first half financial results and a positive procurement environment for the second half of the year,” said Bill Weber, KeyW’s president and chief executive officer.
Second-Quarter 2018 Results
Revenues for the quarter of $128.1 million increased by $4.1 million, or 3.3%, compared to the prior-year quarter. The increase was primarily attributable to increased level of effort on existing business and increased product sales associated with our Intelligence, Surveillance and Reconnaissance (ISR) core focus area.
Operating income for the quarter was $3.7 million, compared with an operating loss of $10.6 million in the prior-year quarter. The increase in operating income and margin resulted primarily from the increase in revenue and gross margins over the prior-year quarter and nearly $13.3 million of acquisition and integration-related expenses in the prior-year quarter. Operating expenses in the quarter included $0.8 million of acquisition and integration costs and an additional $1.2 million of non-recurring expenses.
GAAP net loss for the quarter was $11.4 million, or $(0.23) per diluted share, compared to a GAAP net loss of $18.4 million, or $(0.37) per diluted share in the prior-year quarter. Non-operating expenses in the quarter included $11.4 million on the loss on extinguishment of debt associated with the debt refinancing completed on May 8, 2018.
Adjusted EBITDA was $12.3 million, or 9.6% of revenue, for the quarter, compared to $10.4 million, or 8.4% of revenue, in the prior-year quarter. Adjusted EBITDA increased year-over-year primarily because of higher gross margins over the prior-year quarter driven by increased product sales.
Additional Financial Metrics
Net cash used in operating activities increased $8.6 million for the six months ended June 30, 2018, compared to the prior year, primarily due to the timing of subcontractor and vendor-related payments. Days Sales Outstanding (DSO) declined to 67 days during the second quarter, and the company expects DSO will continue to return to a normalized level by the end of the fiscal year. In the second quarter, the company closed its new senior secured credit facilities, consisting of a $215 million First Lien Term Loan facility maturing in May 2024, a $75 million Second Lien Term Loan facility maturing in May 2025 and a $50 million senior secured Revolving Credit Facility maturing in May 2023. The drawn-down proceeds from the new credit facilities were used to pay off the company’s former credit facility and to repurchase approximately $126.9 million of the company’s 2.50% senior convertible notes pursuant to a tender offer completed in May 2018. Cash and cash equivalents at June 30, 2018, were $27.9 million.
On July 27, 2018, the company received a proposed modification from the prime contractor on the company’s largest flight services program which, in its proposed form, would shorten the contractual period of performance to end in 2018. The company is evaluating what impact the modification could have on its future operations and its financial results. Management does not currently expect the modification to have a material impact on its results of operations in 2018.
Business Development Highlights and Contract Awards
For the second quarter, contract awards totaled approximately $150 million, which was in line with company expectations. Net bookings for the quarter were $113 million, which excludes awards currently in protest. KeyW reported total backlog at June 30, 2018, of $1.1 billion, the same level as the quarter-ending March 31, 2018. In addition, the company reported having approximately $1.3 billion in proposals submitted and awaiting award as of June 30, 2018.
Second-quarter awards were highlighted by a software development award for a Defense Intelligence customer and a U.S. Naval Research Laboratory (NRL) win consisting of both new work and an extension of legacy programs. The NRL award is one of our longest running programs where we have dedicated teams of scientists and engineers performing scientific support services for the NRL. The company was also awarded an extension of a program providing highly differentiated cyber operations support.
KeyW continued to expand and align its impressive portfolio of IDIQ vehicles, winning two attractive IDIQ prime awards during the quarter. The Systems Engineering, Technology and Innovation (SETI) program is a high-end $7.5 billion technology vehicle for technically innovative services and solutions. The company also improved its strong position within the FBI, winning a prime seat on the $300 million Solutions for Intelligence Analysis Services (SIAS) Blanket Purchase Agreement (BPA) to provide intel analysis.
2018 Financial Outlook
KeyW is reiterating the fiscal 2018 guidance it issued on March 15, 2018, based on the company's financial results for the first half of 2018 and its current outlook for the remainder of 2018. The company has evaluated the financial impact of the aforementioned proposed modification and our current conclusion is that it will not have an impact to the 2018 Financial Outlook. The table below summarizes the company's fiscal year 2018 guidance:
About KeyW
KeyW is a pure-play national security solutions provider for the Intelligence, Cyber and Counterterrorism Communities' toughest challenges. We support the collection, processing, analysis and dissemination of information across the full spectrum of their missions. We employ and challenge nearly 2,000 of the most talented professionals in the industry with solving such complex problems as preventing cyber threats, transforming data into intelligence and combating global terrorism. For more information, please visit www.KeyWCorp.com or follow KeyW on Twitter @KeyWCorp.
