Arotech Corporation (NasdaqGM: ARTX) today
announced financial results for the quarter ended March 31, 2019.
First Quarter 2019 Financial Summary:
Consolidated |
|
Three months ended March 31, |
U.S. $ in thousands,
except per share data |
|
2019 |
|
2018 |
GAAP
Measures |
|
|
|
|
Revenue |
|
$ |
20,779 |
|
|
$ |
27,249 |
|
Gross profit |
|
$ |
5,820 |
|
|
$ |
7,711 |
|
Net income (loss) |
|
$ |
(1,407 |
) |
|
$ |
596 |
|
Diluted net income (loss) per
share |
|
$ |
(0.05 |
) |
|
$ |
0.02 |
|
Net cash (used in) provided by
operating activities |
|
$ |
(2,227 |
) |
|
$ |
2,515 |
|
Non-GAAP
Measures (reconciliation to GAAP measures appears in the tables
below) |
Adjusted EBITDA |
|
$ |
52 |
|
|
$ |
2,161 |
|
Adjusted earnings (loss) per
share |
|
$ |
(0.03 |
) |
|
$ |
0.05 |
|
First Quarter 2019 Segment Results:
Training and
Simulation Division |
Three months ended March 31, |
U.S. $ in
thousands |
2019 |
|
2018 |
Revenue |
$ |
13,990 |
|
|
$ |
14,558 |
|
Gross profit |
$ |
5,379 |
|
|
$ |
5,760 |
|
Gross profit % |
38.5 |
% |
|
39.6 |
% |
|
|
|
|
Power Systems
Division |
Three months ended March 31, |
U.S. $ in
thousands |
2019 |
|
2018 |
Revenue |
$ |
6,789 |
|
|
$ |
12,691 |
|
Gross profit |
$ |
440 |
|
|
$ |
1,952 |
|
Gross profit % |
6.5 |
% |
|
15.4 |
% |
First Quarter 2019 Business Highlights:
Training and Simulation Division
- Adds thirty-seven new employees to
staff three bases with maintainers for the Army’s simulator
maintenance program (ATMP) under subcontract to Lockheed
Martin.
- Begins fielding phase one
capability upgrades to the Army’s Virtual Clearance Training Suites
installations under its three phase program.
- Awarded a new rail simulator
subcontract from Bombardier for a Canadian customer.
- Increases backlog for Air Warfare
Systems product line on strong demand for existing U.S. fighter
aircraft launch zone software as well as new uses for our high
speed weapon models.
Power Systems Division
- Continues to advance its Lithium
Ion 6T battery platform and begins selling test quantities
internationally with orders from new customers in Europe and
Asia.
- Receives funding to develop
nano-satellite batteries from the Israeli Ministry of Defense.
- Completes a successful week long
Mobile Electric Hybrid Power Sources (MEHPS) demonstration at an
Army Technical Support & Operation Analysis (TSOA) event held
in March.
“Our first quarter revenues were weaker than
anticipated, leading to earnings results that did not meet our
expectations. While our long term vision remains in place,
the revenue timing uncertainty around the very large opportunities
we are pursuing within the Cyber Mission Kitting IDIQ (Indefinite
Delivery/Indefinite Quantity) that we won in our U.S. power
subsidiary has led us to reduce our outlook for the year,”
commented CEO Dean Krutty. “The slow first quarter result is
attributable to both of our business units producing lower than
planned revenue. The Simulation Division’s Combat Convoy
Simulator and VCTS programs progressed more slowly than expected as
we finalized design work with our customers. The Power Division did
not replace revenue from its terminated Assault Amphibious Vehicle
electrical upgrade with the Marine Corps as soon as anticipated,
which has left us with excess capacity in our South Carolina
manufacturing facility for the near term.”
“Our Simulation Division is now fielding new
capabilities to the U.S. Army on our VCTS program and is moving
from the design to the production phase on the U.S. Marine Corps’
Combat Convoy Simulator (CCS) program, allowing us to begin
assembling the first article and prepare for full production. Also
within our simulation division, numerous simulator contract awards
in the first quarter for our transit and public safety product
lines brought backlog in the commercial vehicle simulator group to
a 10 year high.”
“Our Power Division continues to progress in
diversifying its product portfolio in the absence of battery sales
to traditional customers. Contract backlog in our Israeli
power subsidiary has grown steadily for the last six months, which
will help drive better performance for that division as the year
progresses,” concluded Mr. Krutty.
First Quarter Financial Summary
Revenues for the first quarter of 2019 were
$20.8 million, compared to $27.2 million for the corresponding
period in 2018, a decrease of (23.7)%. The year-over-year decrease
is primarily related to the termination of our Amphibious Assault
Vehicle program (“AAV”) by our customer Science Applications
International Corporation (“SAIC”) as a result of the United States
Marine Corps termination for convenience with SAIC on October 3,
2018. In addition, there was a reduction in the manufacturing
of certain batteries in our Israeli operations.
Gross profit for the first quarter of 2019 was
$5.8 million, or 28.0% of revenues, compared to $7.7 million, or
28.3% of revenues, for the corresponding period in 2018.
Operating expenses were $6.8 million, or 32.6%
of revenues, in the first quarter of 2019, compared to operating
expenses of $6.7 million, or 24.4% of revenues, for the
corresponding period in 2018.
Operating loss for the first quarter was
$(948,000) compared to operating income of $1.1 million in the
corresponding period in 2018. The decrease in operating income is
due to lower revenues in our Power Systems Division.
Arotech’s net loss for the first quarter of 2019
was $(1.4) million, or $(0.05) per basic and diluted share,
compared to net income of $596,000, or $0.02 per basic and diluted
share, for the corresponding period in 2018.
Adjusted Earnings per Share (Adjusted EPS) for
the first quarter of 2019 was a loss of $(0.03) compared to
adjusted earnings of $0.05 for the corresponding period in
2018. The decrease in our net income and quarterly Adjusted
EPS is primarily attributable to lower operating income in 2019
driven by lower sales in our Power Systems Division.
Adjusted Earnings Before Interest, Taxes,
Depreciation and Amortization (Adjusted EBITDA) for the first
quarter of 2019 was $52,000, compared to $2.2 million for the
corresponding period of 2018. The decrease in Adjusted EBITDA
is primarily due to lower operating income in 2019 driven by lower
sales in our Power Systems Division.
Arotech believes that information concerning
Adjusted EBITDA and Adjusted EPS enhances overall understanding of
Arotech’s current financial performance. Arotech computes Adjusted
EBITDA and Adjusted EPS, which are non-GAAP financial measures, as
reflected in the tables below.
Cash Flow Summary
Arotech had net cash used in operating
activities of $(2.2) million for the period ending March 31, 2019,
compared to cash provided by operating activities of $2.5 million
for the corresponding period in 2018. This use of cash is
primarily attributable to the funding of certain long term
contracts where milestone payments do not apply as well as the
termination of the AAV program for which we have not yet received a
settlement.
Balance Sheet Metrics
U.S. $ in
thousands |
For the Periodended March 31, |
|
For the Periodended December 31, |
Balance Sheet
Metrics |
2019 |
|
2018 |
Cash and cash equivalents |
$ |
4,754 |
|
|
$ |
4,445 |
|
Total debt |
$ |
17,945 |
|
|
$ |
14,066 |
|
Line of credit
availability |
$ |
1,716 |
|
|
$ |
8,219 |
|
As of March 31, 2019, Arotech had total debt of
$17.9 million, consisting of $9.7 million in short-term bank debt
under Arotech’s credit facility and $8.2 million in long-term
loans. This is in comparison to December 31, 2018, when Arotech had
total debt of $14.1 million, consisting of $5.5 million in
short-term bank debt under its credit facility and $8.6 million in
long-term loans. The increase in debt is related to the
funding of certain long term contracts and the terminated AAV
program which has not been settled.
The Company had a current ratio (current
assets/current liabilities) of 1.8, compared with the December 31,
2018 current ratio of 2.0.
Arotech’s backlog increased by 30.7% over the
same period last year and 8.8% over the period ending 2018.
U.S. $ in
millions |
For the Period Ended, |
Backlog |
Q1 2019 |
|
Q1 2018 |
|
Q4 2018 |
Total |
$ |
70.5 |
|
|
$ |
54.0 |
|
|
$ |
64.8 |
|
2019 Guidance
Arotech’s 2019 guidance range: We lower
guidance to total revenue of $95 million to $105 million; Adjusted
EBITDA of $7.0 million to $8.0 million; and Adjusted EPS of $0.14
to $0.18. The financial guidance provided is as of today and
Arotech undertakes no obligation to update its estimates in the
future.
Conference Call
Arotech will host a conference call tomorrow,
Thursday, May 9, 2019 at 9:00 a.m. Eastern time, to review its
financial results and business outlook.
To participate, please call one of the following
telephone numbers. Please dial in at least 10 minutes before the
start of the call:
- US: 1-844-602-0380
- International: +1-862-298-0970
The online playback of the conference call will
be archived on Arotech’s website for at least 90 days and a
telephonic playback of the conference call will also be available
by calling 1-877-481-4010 within the U.S. and +1-919-882-2331
internationally. The telephonic playback will be available
beginning at 12:00 p.m. Eastern time on Thursday, May 9, 2019, and
continue through 9:00 a.m. Eastern time on Thursday, May 16, 2019.
The replay passcode is 47921.
About Arotech Corporation
Arotech Corporation is a defense and security
company engaged in two business areas: interactive simulation and
mobile power systems.
Arotech is incorporated in Delaware, with
corporate offices in Ann Arbor, Michigan, and research, development
and production subsidiaries in Michigan, South Carolina, and
Israel. For more information on Arotech, please visit Arotech’s
website at www.arotech.com.
Investor Relations Contact:
Scott SchmidtArotech
Corporation1-800-281-0356Scott.Schmidt@arotechusa.com
Except for the historical information herein,
the matters discussed in this news release include forward-looking
statements, as defined in the Private Securities Litigation Reform
Act of 1995. Forward-looking statements reflect management’s
current knowledge, assumptions, judgment and expectations regarding
future performance or events. Although management believes that the
expectations reflected in such statements are reasonable, readers
are cautioned not to place undue reliance on these forward-looking
statements, as they are subject to various risks and uncertainties
that may cause actual results to vary materially. These risks and
uncertainties include, but are not limited to, risks relating to:
product and technology development; the uncertainty of the market
for Arotech’s products; changing economic conditions; delay,
cancellation or non-renewal, in whole or in part, of contracts or
of purchase orders (including as a result of budgetary cuts
resulting from automatic sequestration under the Budget Control Act
of 2011); and other risk factors detailed in Arotech’s most recent
Annual Report on Form 10-K for the fiscal year ended December 31,
2018, and other filings with the Securities and Exchange
Commission. Arotech assumes no obligation to update the information
in this release. Reference to Arotech’s website above does not
constitute incorporation of any of the information thereon into
this press release.
CONDENSED CONSOLIDATED BALANCE SHEET
SUMMARY (UNAUDITED)(U.S. Dollars)
|
For the Periodended March 31, |
|
For the Periodended December 31, |
|
2019 |
|
2018 |
ASSETS |
|
|
|
CURRENT
ASSETS: |
|
|
|
Cash and cash equivalents |
$ |
4,523,949 |
|
|
$ |
4,222,246 |
|
Restricted collateral
deposits |
229,830 |
|
|
222,712 |
|
Trade receivables, net |
11,801,182 |
|
|
16,259,809 |
|
Contract assets |
22,319,968 |
|
|
17,867,896 |
|
Other accounts receivable and
prepaid expenses |
6,548,213 |
|
|
5,989,263 |
|
Inventories, net |
9,452,464 |
|
|
9,912,748 |
|
Total current assets |
54,875,606 |
|
|
54,474,674 |
|
LONG TERM
ASSETS: |
|
|
|
Contractual and Israeli statutory
severance pay fund |
3,637,590 |
|
|
3,427,705 |
|
Other long term receivables |
541,139 |
|
|
543,205 |
|
Property and equipment, net |
8,931,136 |
|
|
8,914,247 |
|
Right of use asset |
6,035,660 |
|
|
— |
|
Other intangible assets, net |
4,841,152 |
|
|
4,465,778 |
|
Goodwill |
46,138,036 |
|
|
46,138,036 |
|
Total long term assets |
70,124,713 |
|
|
63,488,971 |
|
Total
assets |
$ |
125,000,319 |
|
|
$ |
117,963,645 |
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
CURRENT
LIABILITIES: |
|
|
|
Trade payables |
$ |
6,360,287 |
|
|
$ |
6,442,919 |
|
Other accounts payable and
accrued expenses |
4,689,993 |
|
|
6,498,045 |
|
Current portion of lease
obligation |
622,065 |
|
|
— |
|
Current portion of long term
debt |
2,235,089 |
|
|
2,204,653 |
|
Short term bank credit |
9,703,764 |
|
|
5,500,416 |
|
Contract liabilities |
6,750,785 |
|
|
7,054,779 |
|
Total current liabilities |
30,361,983 |
|
|
27,700,812 |
|
LONG TERM
LIABILITIES: |
|
|
|
Contractual and accrued Israeli
statutory severance pay |
4,465,209 |
|
|
4,125,675 |
|
Long term portion of lease
obligations |
5,714,132 |
|
|
— |
|
Long term portion of debt |
6,006,573 |
|
|
6,360,569 |
|
Deferred income tax
liability |
2,970,978 |
|
|
2,863,098 |
|
Other long term liabilities |
46,800 |
|
|
137,774 |
|
Total long-term liabilities |
19,203,692 |
|
|
13,487,116 |
|
Total liabilities |
49,565,675 |
|
|
41,187,928 |
|
STOCKHOLDERS’
EQUITY: |
|
|
|
Total stockholders’ equity |
75,434,644 |
|
|
76,775,717 |
|
Total liabilities and
stockholders’ equity |
$ |
125,000,319 |
|
|
$ |
117,963,645 |
|
|
|
|
|
CONDENSED CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME (UNAUDITED) (U.S. Dollars, except share
data)
|
Three months ended March 31, |
|
2019 |
|
2018 |
Revenues |
$ |
20,778,639 |
|
|
$ |
27,248,509 |
|
|
|
|
|
Cost of revenues |
14,959,111 |
|
|
19,537,081 |
|
Research and development
expenses |
1,074,064 |
|
|
1,036,702 |
|
Selling and marketing
expenses |
2,152,557 |
|
|
1,878,073 |
|
General and administrative
expenses |
3,170,391 |
|
|
3,225,934 |
|
Amortization of intangible
assets |
370,203 |
|
|
514,911 |
|
Total operating costs and
expenses |
21,726,326 |
|
|
26,192,701 |
|
|
|
|
|
Operating income (loss) |
(947,687 |
) |
|
1,055,808 |
|
|
|
|
|
Other income (expense),
net |
(14 |
) |
|
3 |
|
Financial expense, net |
(298,431 |
) |
|
(213,108 |
) |
Total other expense |
(298,445 |
) |
|
(213,105 |
) |
Income (loss) before income
tax expense |
(1,246,132 |
) |
|
842,703 |
|
|
|
|
|
Income tax expense |
160,881 |
|
|
247,114 |
|
Net income (loss) |
(1,407,013 |
) |
|
595,589 |
|
Other comprehensive income
(loss), net of income tax: |
|
|
|
Foreign currency translation
adjustment |
42,892 |
|
|
(24,260 |
) |
Comprehensive income
(loss) |
(1,364,121 |
) |
|
571,329 |
|
|
|
|
|
Basic net income (loss) per
share |
$ |
(0.05 |
) |
|
$ |
0.02 |
|
Diluted net income (loss) per
share |
$ |
(0.05 |
) |
|
$ |
0.02 |
|
Weighted average number of
shares used in computing basic net income (loss) per share |
26,387,285 |
|
26,447,090 |
Weighted average number of
shares used in computing diluted net income (loss) per share |
26,387,285 |
|
26,447,090 |
|
|
|
|
|
Reconciliation of Non-GAAP Financial
Measure – Continuing Operations
To supplement Arotech’s consolidated financial
statements presented in accordance with U.S. GAAP, Arotech uses a
non-GAAP measure, Earnings Before Interest, Taxes, Depreciation and
Amortization (EBITDA). This non-GAAP measure is provided to enhance
overall understanding of Arotech’s current financial performance.
Reconciliation of the nearest GAAP measure to adjusted EBITDA
follows:
|
Three months ended March 31, |
|
2019 |
|
2018 |
Net income (loss) (GAAP measure) |
$ |
(1,407,013 |
) |
|
$ |
595,589 |
|
Add back: |
|
|
|
Financial expense – including
interest |
298,445 |
|
|
213,105 |
|
Income tax (benefit) expense |
160,881 |
|
|
247,114 |
|
Depreciation and amortization
expense |
863,320 |
|
|
996,402 |
|
Other adjustments* |
135,969 |
|
|
108,495 |
|
Total adjusted EBITDA |
$ |
51,602 |
|
|
$ |
2,160,705 |
|
|
|
|
|
|
|
|
|
* Includes stock compensation expense, one-time
transaction expenses and other non-cash expenses.
CALCULATION OF ADJUSTED EARNINGS PER
SHARE
(U.S. $ in thousands, except per share
data)
|
Three months ended March 31, |
|
2019 |
|
2018 |
Revenue (GAAP measure) |
$ |
20,779 |
|
|
$ |
27,249 |
|
Net income (loss) (GAAP
measure) |
$ |
(1,407 |
) |
|
$ |
596 |
|
Adjustments: |
|
|
|
Amortization |
370 |
|
|
515 |
|
Stock compensation |
136 |
|
|
108 |
|
Non-cash taxes |
108 |
|
|
227 |
|
Other non-recurring expenses |
— |
|
|
— |
|
Net adjustments |
$ |
614 |
|
|
$ |
850 |
|
Adjusted net income |
$ |
(793 |
) |
|
$ |
1,446 |
|
Number of diluted shares |
|
26,387 |
|
|
|
26,447 |
|
Adjusted EPS |
$ |
(0.03 |
) |
|
$ |
0.05 |
|
|
|
|
|
|
|
|
|
Arotech (NASDAQ:ARTX)
Historical Stock Chart
From Aug 2024 to Sep 2024
Arotech (NASDAQ:ARTX)
Historical Stock Chart
From Sep 2023 to Sep 2024