Kratos Defense & Security Solutions, Inc. (Nasdaq:KTOS), a
leading National Security Solutions provider, today reported its
first quarter 2019 financial results. For the first quarter
2019, Kratos reported Revenues of $160.4 million, Adjusted EBITDA
of $17.5 million, or 10.9 percent, a 27.7 percent increase over the
first quarter of 2018, Operating Income of $8.2 million, a 17.1
percent increase over the first quarter of 2018, Cash Flow from
Operations of $16.0 million, and a Free Cash Flow from Operations
of $12.0 million after capital expenditures of $4.0 million.
For the first quarter 2019, the Company reported Adjusted
EPS* of $0.08, a 60.0 percent increase over the first quarter of
2018, Net income of $3.1 million and GAAP EPS of $0.03, a 250.0
percent increase over a first quarter 2018 GAAP EPS loss of
$0.02. Included in the first quarter 2019 Net income are
acquisition costs of $1.2 million related to the recently closed
FTT acquisition.
First quarter 2019 revenues increased $17.4
million over first quarter of 2018 revenues of $143.0 million, or
12.2 percent. Included in first quarter 2019 revenues was
approximately $4.2 million generated from recently acquired
FTT. Excluding the impact of FTT, Kratos revenues increased
organically 9.2 percent year-over-year.
For the first quarter of 2019, Kratos’
Government Solutions Division (KGS) generated Revenues of $125.5
million, Adjusted EBITDA of $15.5 million and Operating Income of
$11.4 million, compared to revenues of $115.2 million, Adjusted
EBITDA of $12.0 million and Operating Income of $7.9 million for
the first quarter of 2018. For the first quarter of 2019,
Kratos’ Unmanned Systems Division (KUSD) generated Revenues of
$34.9 million, Adjusted EBITDA of $2.0 million and Operating Income
of $0.6 million, compared to revenues of $27.8 million, Adjusted
EBITDA of $1.7 million and Operating Income of $0.8 million in the
first quarter of 2018.
For the first quarter of 2019, Kratos reported
bookings of $139.2 million and a book-to-bill ratio of 0.9 to 1.0,
with backlog at March 31, 2019 of $620.2 million, and a last twelve
months ending March 31, 2019 book-to-bill ratio of 1.1 to 1.
In the first quarter, Kratos’ bid and proposal pipeline increased
by $400 million, up to approximately $7.2 billion, at March 31,
2019.
Eric DeMarco, Kratos’ President and CEO, said,
“Every Kratos business unit exceeded its financial forecast in the
first quarter, with the Company reporting increased revenues,
margins, profitability and cash flow. Kratos’ Unmanned
Systems business had a very successful first quarter, including the
initial flight of the XQ-58A Valkyrie and a 1.7 to 1.0 book to bill
ratio. Since the first Valkyrie flight, potential customer interest
in Kratos’ affordable, high performance unmanned aerial drone
systems has increased significantly, and we are more confident than
ever that we will successfully achieve our strategic objective of
being the leader in this expected to be large and fast growing
tactical UAS area class. Additionally, Kratos’ target drone
business continues to ramp, driven by the ongoing recapitalization
of strategic weapon systems by the U.S. and its allies, providing
good visibility to expected future organic revenue, profit and cash
flow growth.”
Mr. DeMarco continued, “Kratos’ space and
satellite command, control, communications and space situational
awareness business, our Company’s largest, also had a strong first
quarter, including a favorable overall mix, and the 2020 DoD budget
space funding request increase of approximately 20 percent provides
confidence in our long term organic growth forecast. Additionally,
Kratos’ C5ISR and Microwave Electronics product business, which
supports radar, missile, electronic warfare and missile defense
systems, including Patriot, THAAD and Iron Dome started the year
well, as did our training systems and solutions business which
supports operational readiness.”
Mr. DeMarco concluded, “We are confident that
Kratos’ strategy of building an intellectual property focused
technology Company that rapidly develops, demonstrates and fields
affordable products and systems is a true differentiating
model. Kratos is aligned with the U.S. National Defense
Strategy and DoD funding priority areas. We believe that our
recent awards, new and increasing production programs, under
contract tactical unmanned aerial system development programs and
increased bid and proposal pipeline are representative of the
strength of our business plan, providing a solid foundation for the
strong organic growth trajectory we are
forecasting.”
Financial GuidanceKratos is providing second
quarter 2019 financial guidance of Revenues of $175 to $185
million, and Adjusted EBITDA of $16 to $18 million, and reaffirming
full year 2019 financial guidance of Revenues of $720 to $760
million, reflecting organic growth of approximately 12.5 percent,
and Adjusted EBITDA of $71 to $77 million.
The Company is reaffirming full year 2019 cash
flow from operations guidance of $40 to $50 million, capital
expenditures of $28 to $30 million, and free cash flow guidance of
$10 to $20 million, plus the expected final cash receipt of the
retained working capital of the Company’s divested PSS business of
approximately $4 to $6 million. Capital expenditures are
expected to continue to be elevated in 2019, reflecting expected
outlays associated with manufacturing equipment for the Company’s
new drone facility in Oklahoma and equipment for a new secured
facility of approximately $6 to $8 million and approximately $4 to
$6 million related to the planned manufacture of company owned
aerial target drones in preparation of fulfilling expected customer
requirements.
Management will discuss the Company’s first
quarter 2019 financial results, as well as its second quarter and
full year 2019 guidance on a conference call beginning at 2:00 p.m.
Pacific (5:00 p.m. Eastern) today. Analysts and institutional
investors may participate in the conference call by dialing (866)
393-0674, and referencing the call by ID number 1479806. The
general public may access the conference call by dialing (877)
344-3935 or on the day of the event by visiting
www.kratosdefense.com for a simultaneous webcast. A replay of
the webcast will be available on the Kratos web site approximately
two hours after the conclusion of the conference call.
About Kratos Defense & Security
Solutions
Kratos Defense & Security Solutions,
Inc. (NASDAQ:KTOS) develops and fields transformative,
affordable technology, platforms and systems for United States
National Security related customers, allies and commercial
enterprises. Kratos is changing the way breakthrough
technologies for these industries are rapidly brought to market
through proven commercial and venture capital backed approaches,
including proactive research and streamlined development
processes. Kratos specializes in unmanned systems,
satellite communications, cyber security/warfare, microwave
electronics, missile defense, hypersonic systems, training and
combat systems. For more information go to
www.kratosdefense.com.
Notice
Regarding Forward-Looking StatementsThis news release
contains certain forward-looking statements that involve risks and
uncertainties, including, without limitation, express or implied
statements concerning the Company’s expectations regarding its
future financial performance, including the Company’s expectations
for its second quarter and full year 2019 revenue and Adjusted
EBITDA, full year 2019 capital expenditures and ability to generate
positive cash flow from operations and positive free cash flow in
2019, the timing and amount of the Company’s receipt of retained
working capital from the Company’s divested PSS business, the
Company’s ability to achieve projected growth in certain of the
Company’s business units and the expected timing of such growth,
the Company’s expectation of ramp on projects, timing associated
with bringing certain contracts back on the planned run rate, the
Company’s bid and proposal pipeline, demand for its products and
services, including the Company’s ability to successfully compete
in the tactical unmanned aerial system area
and expected new customer awards,
performance of key contracts and programs, including
the timing of production and demonstration related to certain of
the Company’s contracts and product offerings, the impact of the
Company’s restructuring efforts and cost reduction measures,
including its ability to improve profitability and cash flow in
certain business units as a result of these actions, benefits to be
realized from the Company’s net operating loss carry forwards, the
availability and timing of government funding for the Company’s
offerings, including the strength of the future funding
environment, timing of LRIP related to the Company’s unmanned
aerial target system offerings, as well as the level of recurring
revenues expected to be generated by these programs once they
achieve full rate production, and market and industry developments,
including projected growth. Such statements are only predictions,
and the Company’s actual results may differ materially from the
results expressed or implied by these statements. Investors are
cautioned not to place undue reliance on any such forward-looking
statements. All such forward-looking statements speak only as of
the date they are made, and the Company undertakes no obligation to
update or revise these statements, whether as a result of new
information, future events or otherwise. Factors that may cause the
Company’s results to differ include, but are not limited to: risks
to our business and financial results related to the reductions and
other spending constraints imposed on the U.S. Government and our
other customers, including as a result of sequestration and
extended continuing resolutions, the Federal budget deficit and
Federal government shut-downs; risks of adverse regulatory action
or litigation; risks associated with debt leverage and cost savings
and cash flow improvements expected as a result of the refinancing
of our Senior Notes; risks that our cost-cutting initiatives will
not provide the anticipated benefits; risks that changes, cutbacks
or delays in spending by the U.S. DoD may occur, which could cause
delays or cancellations of key government contracts; risks of
delays to or the cancellation of our projects as a result of
protest actions submitted by our competitors; risks that changes
may occur in Federal government (or other applicable) procurement
laws, regulations, policies and budgets; risks of the availability
of government funding for the Company's products and services due
to performance, cost growth, or other factors, changes in
government and customer priorities and requirements (including
cost-cutting initiatives, the potential deferral of awards,
terminations or reduction of expenditures to respond to the
priorities of Congress and the Administration, or budgetary cuts
resulting from Congressional committee recommendations or automatic
sequestration under the Budget Control Act of 2011, as amended);
risks of increases in the Federal government initiatives related to
in-sourcing; risks related to security breaches, including cyber
security attacks and threats or other significant disruptions of
our information systems, facilities and infrastructures; risks
related to our compliance with applicable contracting and
procurement laws, regulations and standards; risks relating to
contract performance; risks related to failure of our products or
services; risks associated with our subcontractors’ or suppliers’
failure to perform their contractual obligations, including the
appearance of counterfeit or corrupt parts in our products; changes
in the competitive environment (including as a result of bid
protests); failure to successfully integrate acquired operations
and competition in the marketplace, which could reduce revenues and
profit margins; risks that potential future goodwill impairments
will adversely affect our operating results; risks that anticipated
tax benefits will not be realized in accordance with our
expectations; risks that a change in ownership of our stock could
cause further limitation to the future utilization of our net
operating losses; risks that the current economic environment will
adversely impact our business; and risks related to natural
disasters or severe weather. These and other risk factors are more
fully discussed in the Company’s Annual Report on Form 10-K for the
period ended December 30, 2018, and in our other filings made with
the Securities and Exchange Commission.
Note Regarding Use of Non-GAAP Financial
MeasuresThis news release contains non-GAAP financial
measures, including Adjusted income (loss) per share (computed
using income (loss) from continuing operations before income taxes,
excluding amortization of intangible assets, and capitalized
contract and development costs, stock compensation expense,
acquisition and restructuring related items and other, which
includes but is not limited to legal related items and foreign
transaction gains and losses, less the estimated tax cash payments)
and Adjusted EBITDA (which includes net income attributable to
noncontrolling interest and excludes, among other things, losses
and gains from discontinued operations, restructuring and
transaction related items, stock compensation expense,
foreign transaction gains and losses, and the associated margin
rates). Additional non-GAAP financial measures include Free Cash
Flow from Operations and Adjusted EBITDA related to our KUSD and
KGS businesses. Kratos believes this information is useful to
investors because it provides a basis for measuring the Company’s
available capital resources, the actual and forecasted operating
performance of the Company’s business and the Company’s cash flow,
excluding extraordinary items and non-cash items that would
normally be included in the most directly comparable measures
calculated and presented in accordance with GAAP. The Company’s
management uses these non-GAAP financial measures along with the
most directly comparable GAAP financial measures in evaluating the
Company’s actual and forecasted operating performance, capital
resources and cash flow. Non-GAAP financial measures should not be
considered in isolation from, or as a substitute for, financial
information presented in compliance with GAAP, and investors should
carefully evaluate the Company’s financial results calculated in
accordance with GAAP and reconciliations to those financial
statements. In addition, non-GAAP financial measures as reported by
the Company may not be comparable to similarly titled amounts
reported by other companies. As appropriate, the most directly
comparable GAAP financial measures and information reconciling
these non-GAAP financial measures to the Company’s financial
results prepared in accordance with GAAP are included in this news
release.
*Adjusted earnings per share (Adjusted EPS)
excludes loss from discontinued operations, non-cash amortization
expense, as the Company has historically been acquisitive, non-cash
stock compensation costs, foreign transaction gains and losses,
certain non-recurring items such as acquisition and restructuring
related items and other, and includes cash actually expected to be
paid for income taxes on continuing operations, reflecting the
benefit of the Company’s net operating loss carry forwards of over
$300 million. Kratos believes that reporting adjusted earnings per
share is a meaningful metric to present the Company’s financial
results.
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Kratos Defense & Security Solutions, Inc. |
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Unaudited Condensed Consolidated Statements of
Operations |
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(in millions, except per share data) |
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(in millions, except per share data) |
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Three Months Ended |
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March 31, |
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April 1, |
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2019 |
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2018 |
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Service revenues |
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$ |
62.6 |
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$ |
46.0 |
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Product sales |
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97.8 |
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97.0 |
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Total revenues |
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160.4 |
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143.0 |
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Cost of service revenues |
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42.0 |
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32.9 |
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Cost of product sales |
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73.5 |
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69.3 |
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Total costs |
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115.5 |
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102.2 |
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Gross profit - service
revenues |
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20.6 |
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13.1 |
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Gross profit - product
sales |
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24.3 |
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27.7 |
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Total gross profit |
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44.9 |
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40.8 |
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Selling, general and
administrative expenses |
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28.7 |
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27.3 |
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Restructuring expenses, and
other |
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1.3 |
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0.4 |
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Research and development
expenses |
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3.9 |
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3.6 |
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Depreciation |
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1.3 |
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0.8 |
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Amortization of intangible
assets |
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1.5 |
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1.7 |
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Operating income from continuing operations |
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8.2 |
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7.0 |
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Interest expense, net |
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(5.5 |
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(5.1 |
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Other income (expense),
net |
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(0.5 |
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0.3 |
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Income from continuing operations before income taxes |
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2.2 |
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2.2 |
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Provision (benefit) for income
taxes from continuing operations |
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(1.5 |
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0.9 |
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Income from continuing operations |
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3.7 |
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1.3 |
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Loss from discontinued
operations, net of income taxes |
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(0.6 |
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(3.5 |
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Net income (loss) |
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3.1 |
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(2.2 |
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Less: Net income (loss) attributable to noncontrolling
interest |
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- |
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- |
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Net income (loss) attributable to Kratos Defense & Security
Solutions |
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$ |
3.1 |
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$ |
(2.2 |
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Basic income (loss) per common
share attributable to Kratos Defense: |
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Income from continuing operations |
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$ |
0.04 |
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$ |
0.01 |
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Loss from discontinued operations |
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(0.01 |
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(0.03 |
) |
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Net income (loss) |
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$ |
0.03 |
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$ |
(0.02 |
) |
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Diluted income (loss) per
common share attributable to Kratos Defense: |
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Income from continuing operations |
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$ |
0.03 |
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$ |
0.01 |
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Income (loss) from discontinued operations |
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- |
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(0.03 |
) |
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Net income (loss) |
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$ |
0.03 |
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$ |
(0.02 |
) |
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Weighted average common shares
outstanding: |
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Basic weighted average common shares outstanding |
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104.9 |
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103.7 |
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Diluted weighted average common shares outstanding |
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107.8 |
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105.7 |
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Adjusted EBITDA (1) |
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$ |
17.5 |
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$ |
13.7 |
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Unaudited Reconciliation of GAAP to Non-GAAP
Measures |
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Note: (1)
Adjusted EBITDA is a non-GAAP measure defined as GAAP net income
(loss) attributable to Kratos Defense adjusted for net income |
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attributable to
noncontrolling interest, income(loss) from discontinued operations,
net interest expense, income taxes, depreciation and |
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amortization
expense of intangible assets, and capitalized contract and
development costs, stock compensation, |
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acquisition and restructuring
related items, and foreign transaction gain (loss). |
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Adjusted EBITDA
as calculated by us may be calculated differently than Adjusted
EBITDA for other companies. We have provided |
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Adjusted EBITDA
because we believe it is a commonly used measure of financial
performance in comparable companies and is provided to |
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help investors
evaluate companies on a consistent basis, as well as to enhance
understanding of our operating results. Adjusted EBITDA |
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should not be
construed as either an alternative to net income or as an indicator
of our operating performance or an alternative to cash flows |
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as a measure of
liquidity. The adjustments to calculate this non-GAAP
financial measure and the basis for such adjustments are outlined
below. |
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Please refer to
the following table below that reconciles GAAP net income (loss) to
Adjusted EBITDA. |
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The adjustments to
calculate this non-GAAP financial measure, and the basis for such
adjustments, are outlined below: |
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Interest income
and expense. The Company receives interest income on
investments and incurs interest expense on loans, capital leases
and other |
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financing
arrangements, including the amortization of issue discounts and
deferred financing costs. These amounts may vary from period
to period due to |
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changes in cash and debt
balances. |
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Income
taxes. The Company's tax expense can fluctuate materially
from period to period due to tax adjustments that may not be
directly related to |
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underlying
operating performance or to the current period of operations and
may not necessarily reflect the impact of utilization of our
NOLs. |
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Depreciation. The Company incurs depreciation expense
(recorded in cost of revenues and in operating expenses) related to
capital assets purchased, |
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leased or
constructed to support the ongoing operations of the
business. The assets are recorded at cost or fair value and
are depreciated over the estimated |
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useful lives of individual
assets. |
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Amortization of
intangible assets. The Company incurs amortization of
intangible expense related to acquisitions it has made. These
intangible assets are |
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valued at the time of
acquisition and are amortized over the estimated useful lives. |
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Amortization of
capitalized contract and development costs. The Company
incurs amortization of previously capitalized software development
and non- |
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recurring
engineering costs related to certain targets in its Unmanned
Systems and ballistic missile target businesses as these units are
sold. |
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Stock-based
compensation expense. The Company incurs expense related to
stock-based compensation included in its GAAP presentation of
selling, |
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general and
administrative expense. Although stock-based compensation is
an expense of the Company and viewed as a form of compensation,
these |
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expenses vary in
amount from period to period, and are affected by market forces
that are difficult to predict and are not within the control of
management, |
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such as the
market price and volatility of the Company's shares, risk-free
interest rates and the expected term and forfeiture rates of the
awards. |
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Management
believes that exclusion of these expenses allows comparison of
operating results to those of other companies that disclose
non-GAAP |
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financial measures that
exclude stock-based compensation. |
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Foreign
transaction (gain) loss. The Company incurs transaction gains
and losses related to transactions with foreign customers in
currencies other than |
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the U.S.
dollar. In addition, certain intercompany transactions can
give rise to realized and unrealized foreign currency gains and
losses. |
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Acquisition and
restructuring related items. The Company incurs transaction
related costs, such as legal and accounting fees and other
expenses, related to |
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acquisitions and
divestiture activities. Management believes these items are outside
the normal operations of the Company's business and are not |
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indicative of ongoing
operating results. |
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Restructuring
costs. The Company incurs restructuring costs for cost reduction
actions which include employee termination costs, |
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facility
shut-down related costs and remaining lease commitment costs for
excess or exited facilities. Management believes that these
costs are not |
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indicative of
ongoing operating results as they are either non-recurring and/or
not expected when full capacity and volumes are achieved. |
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Legal related
items. The Company incurs costs related to pending legal
settlements and other legal related matters. Management
believes |
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these items are
outside the normal operations of the Company's business and are not
indicative of ongoing operating results. |
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Adjusted EBITDA
is a non-GAAP financial measure and should not be considered in
isolation or as a substitute for financial information provided
in |
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accordance with
GAAP. This non-GAAP financial measure may not be computed in
the same manner as similarly titled measures used by
other |
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companies.
The Company expects to continue to incur expenses similar to the
Adjusted EBITDA financial adjustments described above, and
investors |
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should not infer
from the Company's presentation of this non-GAAP financial measure
that these costs are unusual, infrequent, or non-recurring. |
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Three Months Ended |
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March 31, |
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April 1, |
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2019 |
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2018 |
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Net income (loss) attributable
to Kratos Defense |
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$ |
3.1 |
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$ |
(2.2 |
) |
|
|
Income (loss) from
discontinued operations, net of income taxes |
|
|
|
0.6 |
|
|
|
3.5 |
|
|
|
Interest expense, net |
|
|
|
5.5 |
|
|
|
5.1 |
|
|
|
Provision (benefit) for income
taxes from continuing operations |
|
|
|
(1.5 |
) |
|
|
0.9 |
|
|
|
Depreciation (including cost
of service revenues and product sales) |
|
|
|
3.6 |
|
|
|
2.8 |
|
|
|
Stock-based compensation |
|
|
|
2.6 |
|
|
|
1.7 |
|
|
|
Foreign transaction (gain)
loss |
|
|
|
0.5 |
|
|
|
(0.2 |
) |
|
|
Amortization of intangible
assets |
|
|
|
1.5 |
|
|
|
1.7 |
|
|
|
Amortization of capitalized
contract and development costs |
|
|
|
0.3 |
|
|
|
- |
|
|
|
Acquisition and restructuring
related items and other |
|
|
|
1.3 |
|
|
|
0.4 |
|
|
|
Plus: Net income (loss)
attributable to noncontrolling interest |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA |
|
|
$ |
17.5 |
|
|
$ |
13.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
acquisition and restructuring related items and other included in
Adjusted EBITDA: |
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
March 31, |
|
April 1, |
|
|
|
|
|
|
2019 |
|
|
|
2018 |
|
|
|
Acquisition and transaction
related items |
|
|
$ |
1.2 |
|
|
$ |
- |
|
|
|
Restructuring costs |
|
|
|
0.1 |
|
|
|
0.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1.3 |
|
|
$ |
0.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kratos Defense & Security Solutions, Inc. |
|
|
Unaudited Segment Data |
|
|
(in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
March 31, |
|
April 1, |
|
|
|
|
|
|
2019 |
|
|
|
2018 |
|
|
|
Revenues: |
|
|
|
|
|
|
|
Unmanned Systems |
|
|
$ |
34.9 |
|
|
$ |
27.8 |
|
|
|
Kratos Government Solutions |
|
|
|
125.5 |
|
|
|
115.2 |
|
|
|
Total revenues |
|
|
$ |
160.4 |
|
|
$ |
143.0 |
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) from
continuing operations: |
|
|
|
|
|
|
|
Unmanned Systems |
|
|
$ |
0.6 |
|
|
$ |
0.8 |
|
|
|
Kratos Government Solutions |
|
|
|
11.4 |
|
|
|
7.9 |
|
|
|
Unallocated corporate expense, net |
|
|
|
(3.8 |
) |
|
|
(1.7 |
) |
|
|
Total operating income from continuing operations |
|
|
$ |
8.2 |
|
|
$ |
7.0 |
|
|
|
|
|
|
|
|
|
|
|
Note: Unallocated corporate expense, net includes costs for certain
stock-based compensation programs (including stock-based
compensation costs for stock options, employee stock purchase plan
and restricted stock units), the effects of items not considered
part of management’s evaluation of segment operating performance,
and acquisition and restructuring related items, corporate costs
not allocated to the segments, legal related items, and other
miscellaneous corporate activities. |
|
|
|
|
|
|
|
|
|
|
Reconciliation of
consolidated Adjusted EBITDA to Adjusted EBITDA by segment is as
follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
March 31, |
|
April 1, |
|
|
|
|
|
|
2019 |
|
|
|
2018 |
|
|
|
Unmanned Systems |
|
|
$ |
2.0 |
|
|
$ |
1.7 |
|
|
|
% of revenue |
|
|
|
5.7 |
% |
|
|
6.1 |
% |
|
|
Kratos Government
Solutions |
|
|
|
15.5 |
|
|
|
12.0 |
|
|
|
% of revenue |
|
|
|
12.4 |
% |
|
|
10.4 |
% |
|
|
Total Adjusted EBITDA |
|
|
$ |
17.5 |
|
|
$ |
13.7 |
|
|
|
% of revenue |
|
|
|
10.9 |
% |
|
|
9.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kratos Defense & Security Solutions, Inc. |
|
|
Unaudited Condensed Consolidated Balance
Sheets |
|
|
(in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
December 30, |
|
|
|
|
|
|
2019 |
|
|
|
2018 |
|
|
|
Assets |
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
$ |
178.4 |
|
|
$ |
182.7 |
|
|
|
Restricted cash |
|
|
|
- |
|
|
|
0.3 |
|
|
|
Accounts receivable, net |
|
|
|
239.3 |
|
|
|
237.4 |
|
|
|
Inventoried costs |
|
|
|
69.2 |
|
|
|
46.8 |
|
|
|
Prepaid expenses |
|
|
|
13.3 |
|
|
|
8.9 |
|
|
|
Other current assets |
|
|
|
9.6 |
|
|
|
10.3 |
|
|
|
Current assets of discontinued operations |
|
|
|
7.3 |
|
|
|
8.3 |
|
|
|
Total current assets |
|
|
|
517.1 |
|
|
|
494.7 |
|
|
|
Property, plant and equipment, net |
|
|
|
113.5 |
|
|
|
67.1 |
|
|
|
Operating lease right-of-use assets |
|
|
|
38.1 |
|
|
|
- |
|
|
|
Goodwill |
|
|
|
459.4 |
|
|
|
425.7 |
|
|
|
Intangible assets, net |
|
|
|
34.4 |
|
|
|
16.1 |
|
|
|
Other assets |
|
|
|
6.4 |
|
|
|
6.5 |
|
|
|
Total assets |
|
|
$ |
1,168.9 |
|
|
$ |
1,010.1 |
|
|
|
Liabilities and Stockholders’ Equity |
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
Accounts payable |
|
|
$ |
47.4 |
|
|
$ |
46.6 |
|
|
|
Accrued expenses |
|
|
|
36.6 |
|
|
|
38.1 |
|
|
|
Accrued compensation |
|
|
|
37.2 |
|
|
|
33.5 |
|
|
|
Accrued interest |
|
|
|
6.5 |
|
|
|
1.6 |
|
|
|
Billings in excess of costs and earnings on uncompleted
contracts |
|
|
|
39.7 |
|
|
|
34.9 |
|
|
|
Current portion of operating lease liabilities |
|
|
|
13.3 |
|
|
|
- |
|
|
|
Other current liabilities |
|
|
|
9.3 |
|
|
|
4.7 |
|
|
|
Other current liabilities of discontinued operations |
|
|
|
5.3 |
|
|
|
5.3 |
|
|
|
Total current liabilities |
|
|
|
195.3 |
|
|
|
164.7 |
|
|
|
Long-term debt principal, net of current portion |
|
|
|
294.4 |
|
|
|
294.2 |
|
|
|
Operating lease liabilities, net of current portion |
|
|
|
31.3 |
|
|
|
- |
|
|
|
Other long-term liabilities |
|
|
|
73.5 |
|
|
|
25.5 |
|
|
|
Other long-term liabilities of discontinued operations |
|
|
|
6.5 |
|
|
|
6.4 |
|
|
|
Total liabilities |
|
|
|
601.0 |
|
|
|
490.8 |
|
|
|
Commitments and contingencies |
|
|
|
|
|
|
|
Redeemable noncontrolling interest |
|
|
|
15.0 |
|
|
|
- |
|
|
|
Stockholders’ equity: |
|
|
|
|
|
|
|
Additional paid-in capital |
|
|
|
1,275.0 |
|
|
|
1,244.5 |
|
|
|
Accumulated other comprehensive loss |
|
|
|
(0.7 |
) |
|
|
(0.7 |
) |
|
|
Accumulated deficit |
|
|
|
(721.4 |
) |
|
|
(724.5 |
) |
|
|
Total Kratos Defense stockholders’ equity |
|
|
|
552.9 |
|
|
|
519.3 |
|
|
|
Total liabilities and stockholders’ equity |
|
|
$ |
1,168.9 |
|
|
$ |
1,010.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kratos Defense & Security Solutions, Inc. |
|
|
Unaudited Condensed Consolidated Statements of Cash
Flows |
|
|
(in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
March 31, |
|
April 1, |
|
|
|
|
|
|
2019 |
|
|
|
2018 |
|
|
|
Operating activities: |
|
|
|
|
|
|
|
Net income (loss) from consolidated operations |
|
|
$ |
3.1 |
|
|
$ |
(2.2 |
) |
|
|
Less: (loss) from discontinued operations |
|
|
|
(0.6 |
) |
|
|
(3.5 |
) |
|
|
Income from continuing operations |
|
|
|
3.7 |
|
|
|
1.3 |
|
|
|
Adjustments to reconcile income from continuing operations to net
cash provided by operating activities from continuing
operations: |
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
|
5.1 |
|
|
|
4.5 |
|
|
|
Amortization of lease right-of-use assets |
|
|
|
3.7 |
|
|
|
- |
|
|
|
Deferred income taxes |
|
|
|
(3.4 |
) |
|
|
- |
|
|
|
Stock-based compensation |
|
|
|
2.6 |
|
|
|
1.7 |
|
|
|
Amortization of deferred financing costs |
|
|
|
0.2 |
|
|
|
0.2 |
|
|
|
Changes in assets and liabilities, net of acquisitions: |
|
|
|
|
|
|
|
Accounts receivable |
|
|
|
(9.0 |
) |
|
|
16.4 |
|
|
|
Unbilled receivables |
|
|
|
19.7 |
|
|
|
(14.2 |
) |
|
|
Inventoried costs |
|
|
|
(10.8 |
) |
|
|
1.3 |
|
|
|
Advance payments received on contracts |
|
|
|
0.1 |
|
|
|
(0.6 |
) |
|
|
Prepaid expenses and other assets |
|
|
|
(1.1 |
) |
|
|
0.8 |
|
|
|
Operating lease liabilities |
|
|
|
2.8 |
|
|
|
- |
|
|
|
Accounts payable |
|
|
|
(0.8 |
) |
|
|
(3.0 |
) |
|
|
Accrued compensation |
|
|
|
3.1 |
|
|
|
3.8 |
|
|
|
Accrued expenses |
|
|
|
(2.7 |
) |
|
|
(6.1 |
) |
|
|
Accrued interest |
|
|
|
4.9 |
|
|
|
4.9 |
|
|
|
Billings in excess of costs and earnings on uncompleted
contracts |
|
|
|
3.0 |
|
|
|
(3.7 |
) |
|
|
Income tax receivable and payable |
|
|
|
1.4 |
|
|
|
0.2 |
|
|
|
Other liabilities |
|
|
|
(6.5 |
) |
|
|
(1.0 |
) |
|
|
Net cash provided by operating activities from continuing
operations |
|
|
|
16.0 |
|
|
|
6.5 |
|
|
|
Investing activities: |
|
|
|
|
|
|
|
Cash paid for acquisitions, net of cash acquired |
|
|
|
(17.6 |
) |
|
|
- |
|
|
|
Capital expenditures |
|
|
|
(4.0 |
) |
|
|
(6.7 |
) |
|
|
Net cash used in investing activities from continuing
operations |
|
|
|
(21.6 |
) |
|
|
(6.7 |
) |
|
|
Financing activities: |
|
|
|
|
|
|
|
Proceeds (use) from the issuance of common stock |
|
|
|
- |
|
|
|
(1.1 |
) |
|
|
Repayment of debt |
|
|
|
- |
|
|
|
(0.2 |
) |
|
|
Debt issuance costs |
|
|
|
- |
|
|
|
(0.1 |
) |
|
|
Repayment of lease obligation |
|
|
|
(0.1 |
) |
|
|
- |
|
|
|
Proceeds from exercise of restricted stock units, employee stock
options, and employee stock purchase plan |
|
|
|
0.9 |
|
|
|
1.8 |
|
|
|
Net cash provided by financing activities from continuing
operations |
|
|
|
0.8 |
|
|
|
0.4 |
|
|
|
Net cash flows from continuing operations |
|
|
|
(4.8 |
) |
|
|
0.2 |
|
|
|
Net operating and investing cash flows of discontinued
operations |
|
|
|
0.3 |
|
|
|
(3.1 |
) |
|
|
Effect of exchange rate changes on cash and cash equivalents |
|
|
|
(0.1 |
) |
|
|
0.2 |
|
|
|
Net decrease in cash and cash equivalents |
|
|
|
(4.6 |
) |
|
|
(2.7 |
) |
|
|
Cash and cash equivalents and restricted cash at beginning of
period |
|
|
|
183.0 |
|
|
|
130.9 |
|
|
|
Cash and cash equivalents and restricted cash at end of
period |
|
|
$ |
178.4 |
|
|
$ |
128.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kratos Defense & Security Solutions, Inc. |
|
|
Unaudited Non-GAAP Measures |
|
|
Computation of Adjusted Earnings Per Share |
|
|
(in millions, except per share data) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted income (loss) from continuing operations and adjusted
earnings per share (Adjusted EPS) are non-GAAP measures for
reporting financial |
|
performance and exclude the impact of certain items and, therefore,
have not been calculated in accordance with GAAP. Management
believes that exclusion |
|
of these items assists in providing a more complete understanding
of the Company's underlying continuing operations results and
trends and allows |
|
for comparability with our peer company index and industry.
The Company uses these measures along with the corresponding GAAP
financial measures |
|
to manage the Company's business and to evaluate its performance
compared to prior periods and the marketplace. The Company
defines adjusted |
|
income (loss) from continuing operations before amortization of
intangible assets, stock-based compensation, foreign transaction
gain/loss, and |
|
acquisition and restructuring related items and other. The
Company uses the estimated cash tax provision in computing adjusted
earnings per share |
|
to reflect the benefit from the utilization of the Company's net
operating losses. Adjusted EPS expresses adjusted income (loss)
from continuing |
|
operations on a per share basis using weighted average diluted
shares outstanding. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table reconciles the most directly comparable GAAP
financial measures to the non-GAAP financial measures. |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
March 31, |
|
April 1, |
|
|
|
|
|
|
2019 |
|
|
|
2018 |
|
|
|
Income from continuing
operations before taxes |
|
|
$ |
2.2 |
|
|
$ |
2.2 |
|
|
|
Add: Amortization of
intangible assets |
|
|
|
1.5 |
|
|
|
1.7 |
|
|
|
Add: Amortization of
capitalized contract and development costs |
|
|
|
0.3 |
|
|
|
- |
|
|
|
Add: Stock-based
compensation |
|
|
|
2.6 |
|
|
|
1.7 |
|
|
|
Add: Foreign transaction
(gain) loss |
|
|
|
0.5 |
|
|
|
(0.2 |
) |
|
|
Add: Acquisition and
restructuring related items and other |
|
|
|
1.3 |
|
|
|
0.4 |
|
|
|
Adjusted income from
continuing operations before income taxes |
|
|
|
8.4 |
|
|
|
5.8 |
|
|
|
|
|
|
|
|
|
|
|
Estimated cash tax
provision |
|
|
|
0.2 |
|
|
|
0.3 |
|
|
|
Adjusted income from
continuing operations attributable to Kratos Defense |
|
|
$ |
8.2 |
|
|
$ |
5.5 |
|
|
|
|
|
|
|
|
|
|
|
Diluted income per common
share attributable to Kratos Defense: |
|
|
|
|
|
|
|
Adjusted income from
continuing operations |
|
|
$ |
0.08 |
|
|
$ |
0.05 |
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares
outstanding |
|
|
|
|
|
|
|
Diluted |
|
|
|
107.8 |
|
|
|
105.7 |
|
|
|
|
|
|
|
|
|
|
|
|
Press
Contact:Yolanda White858-812-7302 Direct Investor
Information:877-934-4687investor@kratosdefense.com |
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