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Share Name | Share Symbol | Market | Type |
---|---|---|---|
The Keyw Holding Corp. | NASDAQ:KEYW | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 11.23 | 11.21 | 11.34 | 0 | 01:00:00 |
ý
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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The KEYW Holding Corporation
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(Exact name of registrant as specified in its charter)
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Maryland
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27-1594952
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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7740 Milestone Parkway, Suite 400
Hanover, Maryland
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21076
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(Address of principal executive offices)
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(Zip Code)
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Large accelerated filer
¨
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Accelerated filer
x
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Non-accelerated filer
¨
(Do not check if smaller reporting company)
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Smaller reporting company
¨
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Emerging growth company
¨
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June 30, 2017
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December 31, 2016
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||||
ASSETS
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Current assets:
|
|
|
|
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|
||
Cash and cash equivalents
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$
|
22,266
|
|
|
$
|
41,871
|
|
Receivables
|
90,022
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|
|
43,141
|
|
||
Inventories, net
|
17,378
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|
|
15,178
|
|
||
Prepaid expenses
|
3,397
|
|
|
1,350
|
|
||
Income tax receivable
|
363
|
|
|
318
|
|
||
Assets of discontinued operations
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—
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3,000
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|
||
Total current assets
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133,426
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104,858
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||
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||||
Property and equipment, net
|
44,130
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40,615
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||
Goodwill
|
491,999
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|
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290,710
|
|
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Other intangibles, net
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27,181
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7,871
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|
||
Other assets
|
3,029
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|
|
1,399
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||
TOTAL ASSETS
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$
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699,765
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$
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445,453
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LIABILITIES AND STOCKHOLDERS’ EQUITY
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Current liabilities:
|
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Revolver
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$
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10,000
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$
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—
|
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Accounts payable
|
19,956
|
|
|
6,913
|
|
||
Accrued expenses
|
22,100
|
|
|
9,941
|
|
||
Accrued salaries and wages
|
29,882
|
|
|
15,122
|
|
||
Term loan – current portion
|
6,750
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|
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—
|
|
||
Deferred revenue
|
6,890
|
|
|
3,760
|
|
||
Liabilities of discontinued operations
|
—
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|
1,185
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|
||
Total current liabilities
|
95,578
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36,921
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||
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|
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Convertible senior notes, net of discount
|
135,711
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|
|
132,482
|
|
||
Term loan – non-current portion, net of discount
|
123,511
|
|
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—
|
|
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Non-current deferred tax liability, net
|
33,394
|
|
|
30,409
|
|
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Other non-current liabilities
|
12,398
|
|
|
12,705
|
|
||
TOTAL LIABILITIES
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400,592
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|
|
212,517
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|
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Commitments and contingencies
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Stockholders’ equity:
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Preferred stock, $0.001 par value; 5 million shares authorized, none issued
|
—
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|
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—
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Common stock, $0.001 par value; 100 million shares authorized, 49,674 and 40,977 shares issued and outstanding
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50
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|
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41
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|
||
Additional paid-in capital
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420,667
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|
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333,883
|
|
||
Accumulated deficit
|
(121,544
|
)
|
|
(100,988
|
)
|
||
Total stockholders’ equity
|
299,173
|
|
|
232,936
|
|
||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
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$
|
699,765
|
|
|
$
|
445,453
|
|
|
Three months ended June 30,
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Six months ended June 30,
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||||||||||||
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2017
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2016
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2017
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2016
|
||||||||
Revenue
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$
|
124,058
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|
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$
|
73,346
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|
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$
|
192,314
|
|
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$
|
146,988
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Cost of revenue
|
94,181
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|
49,467
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|
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142,070
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|
|
100,264
|
|
||||
Operating expenses
|
36,159
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|
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17,345
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|
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56,143
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|
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33,784
|
|
||||
Intangible amortization expense
|
2,489
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|
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1,467
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4,139
|
|
|
2,935
|
|
||||
Operating (loss) income
|
(8,771
|
)
|
|
5,067
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|
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(10,038
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)
|
|
10,005
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|
||||
Non-operating expense, net
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4,777
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2,531
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7,394
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|
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4,164
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|
||||
(Loss) earnings before income taxes from continuing operations
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(13,548
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)
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2,536
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(17,432
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)
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|
5,841
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|
||||
Income tax expense, net on continuing operations
|
3,124
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|
2,972
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|
|
3,124
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|
|
4,367
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|
||||
Net (loss) income from continuing operations
|
(16,672
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)
|
|
(436
|
)
|
|
(20,556
|
)
|
|
1,474
|
|
||||
Loss before income taxes from discontinued operations
|
—
|
|
|
(9,136
|
)
|
|
—
|
|
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(26,945
|
)
|
||||
Income tax benefit, net on discontinued operations
|
—
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|
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—
|
|
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—
|
|
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(490
|
)
|
||||
Net loss on discontinued operations
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—
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|
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(9,136
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)
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—
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(26,455
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)
|
||||
Net Loss
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$
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(16,672
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)
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$
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(9,572
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)
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$
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(20,556
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)
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$
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(24,981
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)
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|
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||||||||
Weighted average common shares outstanding
|
|
|
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||||
Basic
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49,546
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40,359
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48,061
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40,087
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||||
Diluted
|
49,546
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40,359
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48,061
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40,741
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||||
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||||||||
Basic net (loss) earnings per share:
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||||
Continuing operations
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$
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(0.34
|
)
|
|
$
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(0.01
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)
|
|
$
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(0.43
|
)
|
|
$
|
0.04
|
|
Discontinued operations
|
—
|
|
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(0.23
|
)
|
|
—
|
|
|
(0.66
|
)
|
||||
Basic net loss per share
|
$
|
(0.34
|
)
|
|
$
|
(0.24
|
)
|
|
$
|
(0.43
|
)
|
|
$
|
(0.62
|
)
|
|
|
|
|
|
|
|
|
||||||||
Diluted net (loss) earnings per share:
|
|
|
|
|
|
|
|
||||||||
Continuing operations
|
$
|
(0.34
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.43
|
)
|
|
$
|
0.04
|
|
Discontinued operations
|
—
|
|
|
(0.23
|
)
|
|
—
|
|
|
(0.65
|
)
|
||||
Diluted net loss per share
|
$
|
(0.34
|
)
|
|
$
|
(0.24
|
)
|
|
$
|
(0.43
|
)
|
|
$
|
(0.61
|
)
|
|
Common Stock
|
|
Additional Paid-In Capital
|
|
Accumulated Deficit
|
|
Total Stockholders’ Equity
|
|||||||||||
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Shares
|
|
Amount
|
|
|
|
||||||||||||
Balance, January 1, 2017
|
40,977
|
|
|
$
|
41
|
|
|
$
|
333,883
|
|
|
$
|
(100,988
|
)
|
|
$
|
232,936
|
|
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(20,556
|
)
|
|
(20,556
|
)
|
||||
Warrant exercise, net
|
14
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Option exercise, net
|
18
|
|
|
—
|
|
|
109
|
|
|
—
|
|
|
109
|
|
||||
Restricted stock issuances
|
193
|
|
|
—
|
|
|
1,145
|
|
|
—
|
|
|
1,145
|
|
||||
Restricted stock forfeitures
|
(28
|
)
|
|
—
|
|
|
(123
|
)
|
|
—
|
|
|
(123
|
)
|
||||
Stock issued in public offering, net of expenses
|
8,500
|
|
|
9
|
|
|
84,577
|
|
|
—
|
|
|
84,586
|
|
||||
Stock based compensation
|
—
|
|
|
—
|
|
|
1,076
|
|
|
—
|
|
|
1,076
|
|
||||
Balance, June 30, 2017
|
49,674
|
|
|
$
|
50
|
|
|
$
|
420,667
|
|
|
$
|
(121,544
|
)
|
|
$
|
299,173
|
|
|
Six months ended June 30,
|
||||||
|
2017
|
|
2016
|
||||
Net loss
|
$
|
(20,556
|
)
|
|
$
|
(24,981
|
)
|
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
|
|
|
|
|
|
||
Stock compensation
|
2,098
|
|
|
1,147
|
|
||
Depreciation and amortization expense
|
7,797
|
|
|
7,437
|
|
||
Impairment of Commercial Cyber Solutions goodwill
|
—
|
|
|
6,980
|
|
||
Non-cash interest expense
|
3,474
|
|
|
3,120
|
|
||
Gain on disposal of assets
|
—
|
|
|
(3,447
|
)
|
||
Loss on sale of assets held for sale
|
—
|
|
|
3,568
|
|
||
Write-off of deferred financing costs
|
—
|
|
|
340
|
|
||
Deferred taxes
|
3,127
|
|
|
3,870
|
|
||
Changes in assets and liabilities, net of effects of acquisitions:
|
|
|
|
|
|
||
Receivables
|
(6,086
|
)
|
|
18,294
|
|
||
Inventories, net
|
(2,200
|
)
|
|
(1,502
|
)
|
||
Prepaid expenses
|
(532
|
)
|
|
(1,421
|
)
|
||
Accounts payable
|
6,036
|
|
|
(4,811
|
)
|
||
Accrued expenses
|
5,530
|
|
|
3,464
|
|
||
Other non-current assets/liabilities
|
(1,534
|
)
|
|
63
|
|
||
Net cash (used in) provided by operating activities
|
(2,846
|
)
|
|
12,121
|
|
||
Cash flows from investing activities:
|
|
|
|
|
|
||
Acquisitions, net of cash acquired
|
(236,091
|
)
|
|
—
|
|
||
Purchases of property and equipment
|
(5,674
|
)
|
|
(3,758
|
)
|
||
Proceeds from sale of assets
|
—
|
|
|
16,226
|
|
||
Net cash (used in) provided by investing activities
|
(241,765
|
)
|
|
12,468
|
|
||
Cash flows from financing activities:
|
|
|
|
|
|
||
Proceeds from stock issuance, net
|
84,586
|
|
|
—
|
|
||
Proceeds from issuance of term note
|
135,000
|
|
|
—
|
|
||
Issuance cost of term loan and revolving credit facility
|
(4,689
|
)
|
|
—
|
|
||
Proceeds from revolver, net
|
10,000
|
|
|
—
|
|
||
Proceeds from option and warrant exercises, net
|
109
|
|
|
2,114
|
|
||
Net cash provided by financing activities
|
225,006
|
|
|
2,114
|
|
||
Net (decrease) increase in cash and cash equivalents
|
(19,605
|
)
|
|
26,703
|
|
||
Cash and cash equivalents at beginning of period
|
41,871
|
|
|
21,227
|
|
||
Cash and cash equivalents at end of period
|
$
|
22,266
|
|
|
$
|
47,930
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
||
Cash paid for interest
|
$
|
4,007
|
|
|
$
|
1,959
|
|
Cash paid for taxes
|
$
|
16
|
|
|
$
|
83
|
|
|
|
||
Goodwill as of January 1, 2017
|
$
|
290,710
|
|
Acquisition
|
201,289
|
|
|
Goodwill as of June 30, 2017
|
$
|
491,999
|
|
|
Three months ended June 30,
|
|
Six months ended June 30,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Net (loss) income from continuing operations
|
$
|
(16,672
|
)
|
|
$
|
(436
|
)
|
|
$
|
(20,556
|
)
|
|
$
|
1,474
|
|
Loss on discontinued operations
|
—
|
|
|
(9,136
|
)
|
|
—
|
|
|
(26,455
|
)
|
||||
Net loss
|
$
|
(16,672
|
)
|
|
$
|
(9,572
|
)
|
|
$
|
(20,556
|
)
|
|
$
|
(24,981
|
)
|
Weighted average shares – basic
|
49,546
|
|
|
40,359
|
|
|
48,061
|
|
|
40,087
|
|
||||
Effect of dilutive potential common shares
|
—
|
|
|
—
|
|
|
—
|
|
|
654
|
|
||||
Weighted average shares – diluted
|
49,546
|
|
|
40,359
|
|
|
48,061
|
|
|
40,741
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Net (loss) income per share from continuing operations – basic
|
$
|
(0.34
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.43
|
)
|
|
$
|
0.04
|
|
Net loss per share from discontinued operations – basic
|
—
|
|
|
(0.23
|
)
|
|
—
|
|
|
(0.66
|
)
|
||||
Net loss per share – basic
|
$
|
(0.34
|
)
|
|
$
|
(0.24
|
)
|
|
$
|
(0.43
|
)
|
|
$
|
(0.62
|
)
|
Net (loss) Income per share from Continuing Operations – diluted
|
$
|
(0.34
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.43
|
)
|
|
$
|
0.04
|
|
Net loss per share from discontinued operations – diluted
|
—
|
|
|
(0.23
|
)
|
|
—
|
|
|
(0.65
|
)
|
||||
Net loss per share – diluted
|
$
|
(0.34
|
)
|
|
$
|
(0.24
|
)
|
|
$
|
(0.43
|
)
|
|
$
|
(0.61
|
)
|
Anti-dilutive share-based awards, excluded
|
2,262
|
|
|
2,321
|
|
|
2,020
|
|
|
2,539
|
|
|
|
||
Cash
|
$
|
11,583
|
|
Receivables
|
37,795
|
|
|
Prepaid expenses
|
1,679
|
|
|
Property and equipment
|
1,499
|
|
|
Other intangibles
|
23,450
|
|
|
Goodwill
|
201,289
|
|
|
Deferred tax assets
|
142
|
|
|
Other assets
|
1,149
|
|
|
Total assets acquired
|
278,586
|
|
|
Accounts payable
|
7,007
|
|
|
Accrued expenses
|
9,518
|
|
|
Accrued salaries and wages
|
10,784
|
|
|
Deferred revenue
|
1,505
|
|
|
Long-term obligations
|
2,098
|
|
|
Total liabilities assumed
|
30,912
|
|
|
Net assets acquired
|
$
|
247,674
|
|
Net cash paid
|
$
|
236,091
|
|
Actual cash paid
|
$
|
247,674
|
|
|
|
Weighted average amortization period
|
|
Fair Value
|
||
|
|
(in years)
|
|
(in thousands)
|
||
Customer relationships
|
|
16.0
|
|
$
|
21,100
|
|
Backlog
|
|
1.0
|
|
2,350
|
|
|
Total
|
|
|
|
$
|
23,450
|
|
|
Three months ended June 30,
|
|
Six months ended June 30,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
|
(unaudited and in thousands)
|
||||||||||||||
Revenues
|
$
|
124,058
|
|
|
$
|
140,784
|
|
|
$
|
254,259
|
|
|
$
|
274,915
|
|
Net (loss) income from continuing operations
|
(16,672
|
)
|
|
93
|
|
|
(26,428
|
)
|
|
1,812
|
|
Level 1
|
Inputs are unadjusted quoted prices in active markets for identical assets or liabilities the Company has the ability to access.
|
Level 2
|
Inputs are other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
|
Level 3
|
Inputs are unobservable for the asset or liability and rely on management’s own assumptions about what market participants would use in pricing the asset or liability.
|
|
June 30, 2017
|
|
December 31, 2016
|
||||
|
(In thousands)
|
||||||
Receivables
|
|
|
|
|
|
||
Billed
|
$
|
48,648
|
|
|
$
|
29,861
|
|
Unbilled
|
41,374
|
|
|
13,280
|
|
||
Total Receivables
|
$
|
90,022
|
|
|
$
|
43,141
|
|
|
June 30, 2017
|
|
December 31, 2016
|
||||
|
(In thousands)
|
||||||
Property and equipment
|
|
|
|
|
|
||
Aircraft
|
$
|
27,710
|
|
|
$
|
25,425
|
|
Leasehold improvements
|
25,870
|
|
|
23,289
|
|
||
Manufacturing equipment
|
6,306
|
|
|
5,887
|
|
||
Software development costs
|
2,132
|
|
|
2,132
|
|
||
Office equipment
|
15,198
|
|
|
13,312
|
|
||
Total
|
77,216
|
|
|
70,045
|
|
||
Accumulated depreciation
|
(33,086
|
)
|
|
(29,430
|
)
|
||
Property and equipment, net
|
$
|
44,130
|
|
|
$
|
40,615
|
|
|
|
June 30, 2017
|
||||||||||
Intangible
|
|
Gross Carrying
Value
|
|
Accumulated
Amortization
|
|
Net Carrying
Value
|
||||||
|
|
(in thousands)
|
||||||||||
|
|
|
|
|
|
|
||||||
Customer relationships and contracts
|
|
$
|
50,287
|
|
|
$
|
(24,899
|
)
|
|
$
|
25,388
|
|
Software technology and other
|
|
2,162
|
|
|
(369
|
)
|
|
1,793
|
|
|||
Total intangible assets
|
|
$
|
52,449
|
|
|
$
|
(25,268
|
)
|
|
$
|
27,181
|
|
Fiscal Year Ending
|
|
|
||
|
|
(in thousands)
|
||
2017 (remainder of year)
|
|
$
|
3,845
|
|
2018
|
|
4,691
|
|
|
2019
|
|
3,972
|
|
|
2020
|
|
3,159
|
|
|
2021
|
|
2,519
|
|
|
2022 and thereafter
|
|
8,995
|
|
|
|
|
$
|
27,181
|
|
•
|
1.25%
for the quarters ending September 30, 2017 through June 30, 2019;
|
•
|
1.875%
for the quarters ending September 30, 2019 through June 30, 2021; and
|
•
|
2.50%
for the quarters ending September 30, 2021 through March 31, 2022, with the remaining balance payable on the maturity date.
|
Convertible notes
|
|
$
|
149,500
|
|
Term loan
|
|
135,000
|
|
|
Revolver
|
|
10,000
|
|
|
Total debt
|
|
294,500
|
|
|
Less: current portion of term loan
|
|
(6,750
|
)
|
|
Less: current revolver
|
|
(10,000
|
)
|
|
Less: unamortized original issue discount costs and financing fees
|
|
(18,528
|
)
|
|
Long-term debt
|
|
259,222
|
|
2013 Stock Incentive Plan
|
|
|
Total equity available to issue
|
2,700,000
|
|
Total equity outstanding or exercised
|
1,834,705
|
|
Total equity remaining for future grants
|
865,295
|
|
|
Number of
Shares
|
|
Option Exercise
Price
|
|
Weighted Average
Exercise Price
|
||||
Options Outstanding January 1, 2017
|
1,236,222
|
|
|
|
|
|
|||
Granted
|
—
|
|
|
—
|
|
|
—
|
|
|
Exercised
|
(17,487
|
)
|
|
$5.00 - $10.00
|
|
|
$
|
6.23
|
|
Cancelled
|
(237,050
|
)
|
|
$7.41 - $17.11
|
|
|
$
|
13.97
|
|
Options Outstanding June 30, 2017
|
981,685
|
|
|
|
|
|
|
Exercise Price
|
Options
Outstanding
|
|
Intrinsic
Value
|
|
Options
Vested
|
|
Intrinsic
Value
|
|
Weighted Average
Remaining Life
(Years)
|
||||||
$5.00 – $5.50
|
246,650
|
|
|
$
|
975,428
|
|
|
246,650
|
|
|
$
|
975,428
|
|
|
2.13
|
$6.90 – $7.66
|
191,511
|
|
|
366,601
|
|
|
191,511
|
|
|
366,601
|
|
|
4.57
|
||
$7.96 – $9.25
|
146,426
|
|
|
98,712
|
|
|
146,426
|
|
|
98,712
|
|
|
3.63
|
||
$9.50 - $11.69
|
102,350
|
|
|
—
|
|
|
102,350
|
|
|
—
|
|
|
4.72
|
||
$11.99 - $12.97
|
124,524
|
|
|
—
|
|
|
124,524
|
|
|
—
|
|
|
4.97
|
||
$13.00 - $14.57
|
72,974
|
|
|
—
|
|
|
72,974
|
|
|
—
|
|
|
5.25
|
||
$14.88 - $17.11
|
97,250
|
|
|
—
|
|
|
97,250
|
|
|
—
|
|
|
6.56
|
||
|
981,685
|
|
|
$
|
1,440,741
|
|
|
981,685
|
|
|
$
|
1,440,741
|
|
|
|
|
Unvested Shares
|
|
Outstanding January 1, 2017
|
646,378
|
|
Granted
|
186,201
|
|
Vested
|
(163,408
|
)
|
Cancelled
|
(27,825
|
)
|
Outstanding June 30, 2017
|
641,346
|
|
|
Unvested Units
|
|
Outstanding January 1, 2017
|
122,294
|
|
Granted
|
—
|
|
Vested
|
(6,435
|
)
|
Cancelled
|
(3,968
|
)
|
Outstanding June 30, 2017
|
111,891
|
|
|
Unvested Long-Term Incentive Shares
|
|
Outstanding January 1, 2017
|
1,440,000
|
|
Granted
|
500,000
|
|
Cancelled
|
(130,000
|
)
|
Outstanding June 30, 2017
|
1,810,000
|
|
Exercise Price
|
|
Warrants Outstanding
|
|
Warrants Vested
|
|
Remaining Life (Years)
|
||||
$
|
12.65
|
|
|
158,116
|
|
|
158,116
|
|
|
2.41
|
|
June 30, 2017
|
|
December 31, 2016
|
||||
Receivables
|
$
|
—
|
|
|
$
|
3,000
|
|
|
|
|
|
||||
Accounts payable and other accrued expenses
|
$
|
—
|
|
|
$
|
1,185
|
|
|
Three months ended June 30,
|
|
Six months ended June 30,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Revenue
|
$
|
—
|
|
|
$
|
800
|
|
|
$
|
—
|
|
|
$
|
2,878
|
|
Cost of revenue
|
—
|
|
|
711
|
|
|
—
|
|
|
1,687
|
|
||||
Operating expenses
|
—
|
|
|
5,991
|
|
|
—
|
|
|
15,266
|
|
||||
Impairment of goodwill
|
—
|
|
|
—
|
|
|
—
|
|
|
6,980
|
|
||||
Intangible amortization expense
|
—
|
|
|
—
|
|
|
—
|
|
|
381
|
|
||||
Loss on disposal of Hexis
|
—
|
|
|
3,234
|
|
|
—
|
|
|
5,509
|
|
||||
Loss before income taxes from discontinued operations
|
—
|
|
|
(9,136
|
)
|
|
—
|
|
|
(26,945
|
)
|
||||
Income tax benefit, net on discontinued operations
|
—
|
|
|
—
|
|
|
—
|
|
|
(490
|
)
|
||||
Loss on discontinued operations
|
$
|
—
|
|
|
$
|
(9,136
|
)
|
|
$
|
—
|
|
|
$
|
(26,455
|
)
|
|
Six months ended June 30,
|
||||||
|
2017
|
|
2016
|
||||
Non-cash operating items
|
|
|
|
||||
Depreciation and amortization expense
|
$
|
—
|
|
|
$
|
1,016
|
|
Impairment of Commercial Cyber Solutions Goodwill
|
—
|
|
|
6,980
|
|
||
Loss recognized on classification as held for sale
|
—
|
|
|
3,568
|
|
||
Cash flows from investing activities
|
|
|
|
||||
Purchases of property and equipment
|
—
|
|
|
(417
|
)
|
||
Proceeds from Hexis asset divestiture
|
$
|
—
|
|
|
$
|
5,000
|
|
ITEM 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
•
|
Offensive cyberspace operations that deliver capabilities research and development, operations support and Intel analysis
|
•
|
Defensive cyberspace operations and training focused on capabilities development, secure mobile communication and software and hardware security engineering
|
•
|
Cyber mission training and exercises providing real-world training sessions to prepare for a wide range of cyber security challenges
|
•
|
Geospatial systems and analytics design and development to meet unique mission requirements
|
•
|
Airborne intelligence collections to meet remote-sensed data collection and processing needs
|
•
|
Ultra-high resolution imaging systems
|
•
|
Software-reconfigurable radar sensors that are readily adaptable to diverse missions and a wide range of aircraft and ground vehicles
|
•
|
Custom-built sensors tailored to meet the strictest technical and operational requirements
|
•
|
Data discovery, transformation and analysis with a proven, adaptable approach
|
•
|
Data management and security solutions developed by data scientists who understand the complexities of handling and sharing sensitive data
|
•
|
Cloud infrastructure and engineering using Software as a Service and Infrastructure as a Service models to provide universal accessibility and improved manageability
|
•
|
Custom packaging and microelectronics with low- to medium-rate production for virtually any mission
|
•
|
Digital forensics providing unique digital evidence capture and triage devices designed for speed and simplicity
|
•
|
We provide Intelligence analysis support in the following areas:
|
◦
|
Signals Intelligence (SIGINT)
|
◦
|
Open Source Intelligence (OSINT)
|
◦
|
Counterterrorism (CT)
|
◦
|
Cyber Threat Analysis
|
◦
|
Counterintelligence (CI)
|
◦
|
Human Terrain
|
◦
|
All-Source Analysis
|
◦
|
System Engineering (SE) Analysis
|
◦
|
Document and Material Exploitation (DOMEX)
|
◦
|
Imagery Intelligence (IMINT)
|
•
|
We have achieved a Capabilities Maturity Model Integration (CMMI) Level III rating certifying that we have implemented best practices associated with integrated product and process development and supplier sourcing in the following areas:
|
◦
|
Real-time sensor control and fusion,
|
◦
|
Data integration and correlation
|
◦
|
Communications management
|
◦
|
Cross-domain solutions
|
◦
|
Knowledge management
|
◦
|
Automated navigation systems and decision support systems.
|
•
|
We lead customer-funded research and development efforts at government research laboratories in the following fields:
|
◦
|
Electronics and acoustics
|
◦
|
Electronic warfare
|
◦
|
Radar
|
◦
|
Optics
|
◦
|
Chemistry
|
◦
|
Plasma physics, among other areas
|
•
|
Our data fusion, cloud computing, and visual analytics expertise come together to provide unprecedented new capabilities for intelligence analysts.
|
•
|
We apply a systems-level perspective and tailor our solutions to ensure ease-of-use and ease-of-maintenance for our clients.
|
•
|
Our superior engineering skills and full lifecycle management capabilities support the design and integration of innovative and cost effective solutions that are durable, rugged, easily transported and have a low footprint.
|
•
|
We provide on-going support including service and reset to ensure the longevity of our tactical mobile solutions. This area of our business is ISO 9001:2008 approved.
|
CONSOLIDATED OVERVIEW
(In thousands) |
|
Three months ended June 30, 2017
|
|
% of Revenue
|
|
Three months ended June 30, 2016
|
|
% of Revenue
|
||||||
Revenue
|
|
$
|
124,058
|
|
|
100.0
|
%
|
|
$
|
73,346
|
|
|
100.0
|
%
|
Cost of revenue
|
|
94,181
|
|
|
75.9
|
%
|
|
49,467
|
|
|
67.4
|
%
|
||
Operating expenses
|
|
36,159
|
|
|
29.1
|
%
|
|
17,345
|
|
|
23.6
|
%
|
||
Intangible amortization
|
|
2,489
|
|
|
2.0
|
%
|
|
1,467
|
|
|
2.0
|
%
|
||
Non-operating expense, net
|
|
4,777
|
|
|
3.9
|
%
|
|
2,531
|
|
|
3.5
|
%
|
||
Income tax expense, net on continuing operations
|
|
3,124
|
|
|
2.5
|
%
|
|
2,972
|
|
|
4.1
|
%
|
||
Loss on discontinued operations
|
|
—
|
|
|
—
|
%
|
|
(9,136
|
)
|
|
(12.5
|
)%
|
CONSOLIDATED OVERVIEW
(In thousands) |
|
Six months ended June 30, 2017
|
|
% of Revenue
|
|
Six months ended June 30, 2016
|
|
% of Revenue
|
||||||
Revenue
|
|
$
|
192,314
|
|
|
100.0
|
%
|
|
$
|
146,988
|
|
|
100.0
|
%
|
Cost of revenue
|
|
142,070
|
|
|
73.9
|
%
|
|
100,264
|
|
|
68.2
|
%
|
||
Operating expenses
|
|
56,143
|
|
|
29.2
|
%
|
|
33,784
|
|
|
23.0
|
%
|
||
Intangible amortization
|
|
4,139
|
|
|
2.2
|
%
|
|
2,935
|
|
|
2.0
|
%
|
||
Non-operating expense, net
|
|
7,394
|
|
|
3.8
|
%
|
|
4,164
|
|
|
2.8
|
%
|
||
Income tax expense, net on continuing operations
|
|
3,124
|
|
|
1.6
|
%
|
|
4,367
|
|
|
3.0
|
%
|
||
Loss on discontinued operations
|
|
—
|
|
|
—
|
%
|
|
(26,455
|
)
|
|
(18.0
|
)%
|
•
|
during any calendar quarter (and only during such calendar quarter) commencing after the calendar quarter ending September 30, 2014, if the last reported sale price of the Company’s common stock, for at least 20 trading days (whether or not consecutive) in the period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price for the Notes on each applicable trading day;
|
•
|
during the five-business day period immediately after any five consecutive trading day period in which the trading price per $1,000 principal amount of Notes for each trading day of that period was less than 98% of the product of the last reported sale price of Company common stock and the conversion rate for the Notes for each such trading day; or
|
•
|
upon the occurrence of specified corporate events as described in the Indenture.
|
•
|
1.25% for the quarters ending September 30, 2017 through June 30, 2019;
|
•
|
1.875% for the quarters ending September 30, 2019 through June 30, 2021; and
|
•
|
2.50% for the quarters ending September 30, 2021 through March 31, 2022, with the remaining balance payable on the maturity date.
|
•
|
We are enhancing our internal controls to include a control designed to prevent the improper application of revenue recognition on newly signed contracts. The control will include the utilization of a revenue recognition checklist that will be documented and reviewed by management as part of the accounting department’s assessment of each new contract.
|
•
|
We are including our contract specialists in management’s quarterly review of unique and complex revenue transactions.
|
•
|
We are in the process of assessing our portfolio of contracts in order to adequately adopt new revenue recognition standards under ASC-606 guidance for adoption in FY 2018. As part of this assessment, management will design controls to prevent and detect misstatements that could arise from a transition to the new guidance.
|
•
|
requiring us to dedicate a substantial portion of our cash flow to service our debt, which will reduce the funds available working capital, capital expenditures, acquisitions and other general corporate purposes;
|
•
|
limiting our flexibility in planning for and reacting to changes in our business and in the industry in which we operate;
|
•
|
making us more vulnerable to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation;
|
•
|
limiting our ability to borrow additional amounts for working capital, capital expenditures, acquisitions, debt service requirements, execution of our strategy, or other purposes; and
|
•
|
placing us at a disadvantage compared to our competitors who have less debt.
|
|
|
THE KEYW HOLDING CORPORATION
|
|
|
|
|
|
Date:
|
August 9, 2017
|
By:
|
/s/ William J. Weber
|
|
|
William J. Weber
|
|
|
|
President and Chief Executive Officer
|
|
|
|
|
|
Date:
|
August 9, 2017
|
By:
|
/s/ Michael J. Alber
|
|
|
Michael J. Alber
|
|
|
|
Executive Vice President and Chief Financial Officer
|
Exhibit No.
|
|
Exhibit Description
|
|
|
|
|
|
3.1
|
|
Amended and Restated Articles of Incorporation of the Company, as filed on October 6, 2010
|
(1)
|
|
|
|
|
3.2
|
|
Certificate of Correction of Articles of Amendment and Restatement
|
(2)
|
|
|
|
|
3.3
|
|
Amended and Restated Bylaws of the Company, effective as of August 13, 2014
|
(3)
|
|
|
|
|
4.1
|
|
Specimen of Common Stock Certificate
|
(4)
|
|
|
|
|
4.2
|
|
Indenture, dated July 21, 2014, between the Company and Wilmington Trust, National Association, as trustee.
|
(5)
|
|
|
|
|
4.3
|
|
First Supplemental Indenture, dated July 21, 2014, between the Company and Wilmington Trust, National Association, as trustee.
|
(5)
|
|
|
|
|
4.4
|
|
Form of 2.50% Convertible Senior Note due 2019 (incorporated by reference to Exhibit 4.2 hereto).
|
(5)
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|
|
|
|
10.1
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|
Credit Agreement, dated as of April 4, 2017, by and among The KeyW Corporation, as borrower, The KeyW Holding Corporation, the several lenders party thereto, Royal Bank of Canada, as administrative agent and collateral agent , and RBC Capital Markets, as lead arranger and bookrunner.
|
(6)
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|
|
|
|
10.2
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|
Security Agreement, dated as of April 4, 2017, by and among The KeyW Corporation, the Company, the other signatories thereto, as grantors, and Royal Bank of Canada, as collateral agent.
|
(7)
|
|
|
|
|
10.3
|
|
Guaranty Agreement, dated as of April 4, 2017, by and among The KeyW Corporation, the Company and certain subsidiaries of KeyW.
|
(8)
|
|
|
|
|
10.4
|
|
Transition Agreement, dated May 9, 2017, between The KeyW Corporation and Kim DeChello.
|
(9)
|
|
|
|
|
10.5
|
|
Transition Agreement, dated May 9, 2017, between The KeyW Corporation and Mark Willard.
|
(10)
|
|
|
|
|
10.6
|
|
Employment Agreement, dated May 9, 2017, between The KeyW Corporation and John Sutton.
|
(11)
|
|
|
|
|
31.1
|
|
Certification of the Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a)
|
x
|
|
|
|
|
31.2
|
|
Certification of the Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a)
|
x
|
|
|
|
|
32.1*
|
|
Certification of the Chief Executive Officer and the Chief Financial Officer and Principal Accounting Officer pursuant to Rule 13a-14(b) of the Exchange Act and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002
|
x
|
|
|
|
|
101.INS**
|
|
XBRL Instance Document
|
x
|
|
|
|
|
101.SCH**
|
|
XBRL Taxonomy Extension Schema Document
|
x
|
|
|
|
|
101.CAL**
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
x
|
|
|
|
|
101.LAB**
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
x
|
|
|
|
|
101.PRE**
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
x
|
|
|
|
|
101.DEF**
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
x
|
|
x
|
Filed herewith.
|
(1)
|
Filed as Exhibit 3.1 to the Registrant's Form 10-K filed March 29, 2011, File No. 001-34891.
|
(2)
|
Filed as Exhibit 3.1 to the Registrant's Form 8-K filed July 15, 2014, File No. 001-34891.
|
(3)
|
Filed as Exhibit 3.1 to the Registrant's Form 8-K reporting under Items 5.02, 5.03, 5.07, filed August 15, 2014, File No. 001-34891.
|
(4)
|
Filed as Exhibit 4.3 to the Registrant's Registration Statement on Form S-1, as amended, File No. 333-167608.
|
(5)
|
Filed as Exhibits 4.1, 4.2, and 4.3, respectively to the Registrant’s Current Report on Form 8-K filed July 21, 2014, File No. 001-38491.
|
(6)
|
Filed as Exhibit 10.1 to the Registrant’s Form 8-K filed April 7, 2017.
|
(7)
|
Filed as Exhibit 10.2 to the Registrant's Form 8-K filed April 7, 2017.
|
(8)
|
Filed as Exhibit 10.3 to the Registrant’s Form 8-K filed April 7, 2017
|
(9)
|
Filed as Exhibit 10.1 to the Registrant’s Form 8-K filed May 15, 2017
|
(10)
|
Filed as Exhibit 10.2 to the Registrant’s Form 8-K filed May 15, 2017
|
(11)
|
Filed as Exhibit 10.3 to the Registrant’s Form 8-K filed May 15, 2017
|
*
|
This exhibit is being “furnished” with this periodic report and are not deemed “filed” with the Securities and Exchange Commission and are not incorporated by reference in any filing of the Company under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation by reference language in any such filing.
|
**
|
Pursuant to Regulation S-T, this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.
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