Market Overview

KeyW Reports First-Quarter 2019 Financial Results

  • Revenue of $113.8 million
  • Operating income of $1.2 million
  • Adjusted EBITDA (see Table 1 below) of $8.8 million or 7.7% of revenue
  • Contract awards of $87 million

HANOVER, Md., May 07, 2019 (GLOBE NEWSWIRE) -- The KeyW Holding Corporation (NASDAQ:KEYW), today announced first-quarter 2019 financial and operating results.

CEO Commentary

"Our first quarter results were largely in-line with company expectations and we continue to see strong sequential momentum for the remainder of the year.  Based on the financial results for the first quarter and our outlook for the remainder of the year, our full-year 2019 expectations remain intact," said Bill Weber, KeyW's president and chief executive officer.  "We look forward to our combination with Jacobs – this transaction provides a platform to accelerate KeyW's success in leveraging its core competencies in ISR, Cyber and Analytics and creates significant shareholder value."

First-Quarter 2019 Results

Revenues of $113.8 million for the quarter decreased by $12.0 million compared to the prior-year quarter. The decrease in revenue was primarily attributable to the completion of our flight services contract and lower related product solution sales, partially offset by the ramp up on new awards.

Operating income for the quarter was $1.2 million, compared with operating income of $0.7 million in the prior-year quarter. Program profitability was in-line with the prior-year quarter and operating expenses declined due to reduced facility costs during the first quarter of 2019 and higher integration-related expenses incurred during the first quarter of 2018. 

GAAP net loss for the quarter was $4.1 million, or ($0.08) per diluted share compared to GAAP net loss of $3.4 million, or ($0.07) per diluted share in the prior-year quarter.  The variance is due primarily to higher interest expense associated with borrowings under our 2018 credit facility in the first quarter of 2019 when compared to our 2017 credit facility, under which we operated in the first quarter of 2018. 

Adjusted EBITDA for the quarter was $8.8 million, or 7.7% of revenue, compared to $11.6 million, or 9.2% of revenue, in the prior-year quarter.  The decrease in adjusted EBITDA was driven primarily by the completion of our flight services contract and lower related product solution sales, partially offset by the reduction in operating expenses discussed above.

Net cash used in operating activities improved by $4.0 million for the first quarter of 2019, when compared to the prior year quarter, primarily due to a reduction in receivables driven by improved collection efforts, partially offset by lower cash earnings and the timing of fringe benefit related payments. Cash and cash equivalents totaled $25.5 million as of March 31, 2019.

Adjusted EBITDA, a non-GAAP measure excludes: non-cash expenses related to depreciation, intangible amortization and share-based compensation; gain or loss on sale of assets; interest expense, net; income tax expense or benefit, net; acquisition and integration costs; and other non-recurring expenses. See KeyW's non-GAAP financial measures and the related reconciliation to GAAP measures included elsewhere in this release.

Business Development Highlights and Contract Awards

KeyW reported total backlog at March 31, 2019 of $1.1 billion, the same level as the quarter-ending December 31, 2018.  In addition, the company had approximately $1.6 billion in proposals submitted and awaiting award as of March 31, 2019.

First-quarter awards were comprised of 79% new business and base growth and 21% were recompete awards.  Notable awards for the quarter included the following:

U.S. Intelligence Community: KeyW was awarded a $34 million prime contract extension with a national security customer to provide software development, systems engineering and integration support for automated and assisted radio frequency processing, analysis and reporting.

U.S. Intelligence Community: KeyW was awarded a $10.5 million contract modification with a national security customer developing critical software solutions. This award includes new work and the continuation of software development efforts for classified systems supporting enduring national security missions.

Naval Research Lab (NRL): KeyW was awarded a 2-year, $9.3 million contract from NRL to perform research, development, test and evaluation services using network emulation systems to examine both current and proposed Navy communications and network systems and protocols. KeyW engineers and scientists will model, simulate, emulate and integrate hardware and software systems in various testbeds to provide risk assessment and technology recommendations for Navy and Joint tactical networks.

Defense Advanced Research Projects Agency (DARPA): KeyW was awarded a 3-year, $6.5 million contract from DARPA for Systematizing Confidence in Open Research and Evidence (SCORE). Under this contract, KeyW's data scientists will develop and deploy automated tools to assign "Confidence Scores" to various Social and Behavioral Science research results and claims.

Department of Defense:  KeyW was awarded a $5.4 million contract modification as a key subcontractor to Lockheed Martin on the U.S. Army Training Aids, Devices, Simulators and Simulations Maintenance Program (ATMP) contract.  Under its contract, KeyW applies its mission understanding and technical expertise to advance Army modeling, simulation and training capabilities.

Trailing twelve-month awards were $660 million, of which approximately 73% is new business and base growth and 27% secures our base business via contract extensions and recompete awards.

Due to the pending transaction with Jacobs, KeyW will not be updating its outlook for fiscal 2019 and will not be hosting a conference call regarding its first quarter 2019 business results.

About KeyW

KeyW is an innovative national security solutions provider to the Intelligence, Cyber, and Counterterrorism communities. KeyW's advanced technologies in cyber; intelligence, surveillance and reconnaissance; and analytics span the full spectrum of customer missions and enhanced capabilities. The company's highly skilled workforce solves complex customer challenges such as preventing cyber threats, transforming data to actionable intelligence, and building and deploying sensor packages into any domain. For more information, please visit or follow @KeyWCorp on Twitter.

NOTICE TO INVESTORS ABOUT THE PROPOSED TENDER OFFER FOR KEYW SHARES:  KeyW and Jacobs Engineering Group, Inc. ("Jacobs") entered into a definitive Agreement and Plan of Merger on April 21, 2019 (the "Merger Agreement"), providing for the acquisition of all of the shares of KeyW common stock for $11.25 per share.  Pursuant to the terms of the Merger Agreement, Atom Acquisition Sub, Inc., a wholly-owned subsidiary of Jacobs ("Purchaser") will conduct an all-cash tender offer for 100% of KeyW's common stock (the "Offer") and, subject to the successful completion of the Offer, Merger Sub will merge with and into KeyW (the "Merger") resulting in KeyW becoming a wholly owned indirect subsidiary of Jacobs. The Offer for the outstanding shares of KeyW has not yet commenced.  This announcement is for informational purposes only and is neither an offer to purchase nor a solicitation of an offer to sell shares of KeyW, nor is it a substitute for the tender offer materials that Jacobs Purchaser will file with the U.S. Securities and Exchange Commission (the "SEC") upon commencement of the Offer.  At the time the Offer is commenced, Jacobs and Purchaser will file tender offer materials on Schedule TO, and KeyW will file a Solicitation/Recommendation Statement on Schedule 14D-9 with the SEC with respect to the Offer. THE OFFER MATERIALS (INCLUDING AN OFFER TO PURCHASE, A RELATED LETTER OF TRANSMITTAL AND CERTAIN OTHER TENDER OFFER DOCUMENTS) AND THE SOLICITATION/RECOMMENDATION STATEMENT WILL CONTAIN IMPORTANT INFORMATION.  HOLDERS OF SHARES OF KEYW COMMON STOCK ARE URGED TO READ THESE DOCUMENTS WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION THAT HOLDERS OF KEYW COMMON STOCK SHOULD CONSIDER BEFORE MAKING ANY DECISION REGARDING TENDERING THEIR SHARES.  The Offer to Purchase, the related Letter of Transmittal and certain other tender offer documents, as well as the Solicitation/Recommendation Statement, will be made available to all holders of shares of KeyW at no expense to them. In addition, KeyW and Jacobs file annual, quarterly and special reports and other information with the SEC.

Investors and security holders may obtain free copies of the tender offer materials and the Solicitation/Recommendation Statement (when available) and other documents filed with the SEC by KeyW or Jacobs through the website maintained by the SEC at, KeyW's website at or Jacobs' website at In addition, the documents (when available) may be obtained free of charge by contacting the investor relations department of KeyW or Jacobs.

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, our ability to ultimately realize revenue from bookings and awards reported in this press release, and those risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2018 filed with the SEC on March 12, 2019 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. In addition, there are various risks and uncertainties associated with the pending merger transaction between the Company and Jacobs Engineering Group, Inc., including the occurrence of any event, change or other circumstances that could give rise to the right of one or both of KeyW and Jacobs to terminate the definitive merger agreement between KeyW and Jacobs; the outcome of any legal proceedings that may be instituted against KeyW, Jacobs or their respective shareholders or directors; the ability to obtain regulatory approvals and meet other conditions to the consummation of the tender offer and the other conditions set forth in the merger agreement, including the risk that regulatory approvals required for the merger are not obtained or are obtained subject to conditions that are not anticipated or that are material and adverse to KeyW's business; a delay in closing the merger; business disruptions from the proposed tender offer and merger that will harm KeyW's business, including current plans and operations; potential adverse reactions or changes to business relationships resulting from the announcement or completion of the tender offer or merger; certain restrictions during the pendency of the tender offer or merger that may impact KeyW's ability to pursue certain business opportunities or strategic transactions; the ability of KeyW to retain and hire key personnel; and the business, economic and political conditions in the sectors in which KeyW operates.  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, unless required by law.

Media Contact:
Investor Contact:
Karen Coker Mark Zindler
Director, Corporate Communications Vice President, Investor Relations and Treasury
443.733.1613 703.817.4908 


Condensed Consolidated Statements of Operations (unaudited)

  Three months ended March 31,
  2019   2018 (1)
  (In thousands, except per share amounts)
Revenues $ 113,761     $ 125,742  
Costs of revenues, excluding amortization 85,501     94,216  
Operating expenses 24,902     26,917  
Intangible amortization expense 2,150     3,941  
Operating income 1,208     668  
Interest expense, net 6,308     4,828  
Other non-operating income, net (73 )   (5 )
Loss before income taxes (5,027 )   (4,155 )
Income tax benefit, net (977 )   (756 )
Net loss $ (4,050 )   $ (3,399 )
Weighted average common shares outstanding      
Basic 49,988     49,866  
Diluted 49,988     49,866  
Loss per share      
Basic $ (0.08 )   $ (0.07 )
Diluted $ (0.08 )   $ (0.07 )
(1) The balances for the three months ended March 31, 2018, have been revised to reflect the correction of certain errors that management has determined are not material.

Condensed Consolidated Balance Sheets (unaudited)

  March 31, 2019(1)   December 31, 2018
ASSETS  (In thousands, except par value per share amounts)
Current assets:      
Cash and cash equivalents $ 25,533     $ 36,133  
Accounts receivable, net 33,216     27,661  
Unbilled receivables, net 57,289     59,357  
Inventories, net 24,639     24,111  
Prepaid expenses and other current assets 2,295     2,797  
Income tax receivable 172     155  
Assets held for sale     2,296  
Total current assets 143,144     152,510  
Property and equipment, net 25,614     21,073  
Goodwill 455,197     455,197  
Other intangibles, net 41,454     43,604  
Operating lease right-of-use assets 35,333      
Other non-current assets 3,107     3,597  
TOTAL ASSETS $ 703,849     $ 675,981  
Current liabilities:      
Accounts payable $ 16,481     $ 15,578  
Accrued expenses 18,710    
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