04 Jun 20. General Atomics Aeronautical Systems, Inc. (GA-ASI), a global leader in Remotely Piloted Aircraft, announced today that it has acquired a majority of the assets of IJK Controls, including facilities and all Intellectual Property. The corresponding workforce will join GA-ASI. IJK Controls is a Pasadena, California-based provider of innovative solutions for stabilization, pointing and tracking of cameras, sensors and antennas. The IJK workforce and assets will be integrated into GA-ASI to support the organization’s growth initiatives focused on the development and fielding of advanced sensors and payloads for GA-ASI’s portfolio of Unmanned Aircraft Systems.
“We are excited to welcome the IJK Controls team to the GA-ASI family,” said Linden Blue, CEO, GA-ASI. “Leveraging the team’s extensive expertise in the rapidly developing field of stabilized gimbals for airborne applications, GA-ASI will expand its product portfolio and enable new mission capabilities for our customers.”
The addition of IJK to GA-ASI adds critical capabilities in the development of Electro-Optical/Infrared (EO/IR) and Radio Frequency (RF) gimbaled and turret-based systems for advanced airborne Intelligence, Surveillance and Reconnaissance (ISR), communications and weapons.
03 Jun 20. With a very satisfactory order intake of 2,842 MDKK, Terma ended the 2019/20 fiscal year with a record-high order backlog of 3,222 MDKK, compared to 2,297 MDKK the year before. Revenue for the fiscal year was 1,917 MDKK, compared to 1,803 MDKK in 2018/19. Earnings before tax (EBT) was 110 MDKK in 2019/20, compared to 95 MDKK the year before.
During the year, Terma has increased the staff level, and at the end of the fiscal year, Terma had 1,596 full-time employees.
Significant new contracts
“With a record-high order intake and order backlog, Terma has a very comfortable base for the coming years’ development,” says CEO Jes Munk Hansen. He continues:
“During the fiscal year, we have secured several significant contracts. Among other things, we have signed a 10-year support, maintenance, and development contract with the Danish Defence Acquisition and Logistics Organization (DALO), and we have had a breakthrough in the Canadian market with radar systems for their coastguard. We have secured several large contracts with the U.S. Air Force for self-protection equipment and advanced pylons, and we expect further access to contracts with the U.S. Air Force this year. This confirms that the United States remains Terma’s most important market, but both Europe and the Far East have also developed positively. We are thus preparing to open an office in Indonesia later this year.”
Court case in Poland
In April 2020, the Polish Court of Appeal delivered its judgment in the dispute which Terma filed in 2014 against the Polish Ministry of National Defence for breach of contract. Despite the fact that Terma has a strong case from a legal perspective, the court ruled in favor of the Polish Ministry of Defence. The judgment is in line with the provision made in 2018/19, hence the event does not have any impact on the result for 2019/20. The case relates to a contract which was entered into in 2010 with the Polish Ministry of National Defence for electronic self-protection equipment for helicopters.
The F-35 program
New contracts for the coming years’ production of aerostructures and electronics for the F-35 program ensure continued growth in the factories in Grenaa and Lystrup. Due to concentrated and targeted efforts to expand the capacity and at the same time increase efficiency, the F-35 program is developing profitably and competitively:
“Our targeted focus on the F-35 program is today a significant part of Terma’s overall business, and we receive high recognition from customers and the F-35 program management for our on-time and high-quality deliveries,” says Jes Munk Hansen and continues:
”In the spring of 2020, we reached a total staff of 500 employees in Grenaa, and when the program reaches full-rate production during the following years with production of up to 190 aircraft per year, we will further increase the staff level in Grenaa.
Strategic focus areas
The Arctic region and Artificial Intelligence (AI) and data-oriented technologies are areas of major strategic interest to Terma in the years to come. The continued reinforcement of the Danish Defence with focus on the Arctic carries business opportunities for Terma together with the national defense industry, as well as with international partners.
“Our customers are experiencing increasing complexity in their operations, and we see AI to provide enhanced automation and assisted decision making to help operators cope with more data and a need to make faster and more precise decisions. We have built up significant experience with and expertise in artificial intelligence in several of our products and in connection with a major NATO project, and we have now established Terma AI Center of Excellence as a central hub for AI and data-oriented competencies with a team of specialists who facilitate the use of the technologies in our products and solutions,”says Jes Munk Hansen.
The Board of Directors for Terma A/S
The Annual Report 2019/20 was approved at the Annual General Meeting on Thursday, 28 May 2020. The external members of Terma’s Board of Directors are: Flemming H. Tomdrup (Chairman), Jørgen Huno Rasmussen (Deputy Chairman), Carsten Dilling, and Karen-Marie Katholm. The employee representatives are: Bo Laursen, Martin Anders Hedegaard, and Benny Daugaard Laursen. The Annual Report covers the period 1 March 2019 – 29 February 2020.
03 Jun 20. Italy’s Piaggio Aerospace draws 19 international bidders. Italy’s Piaggio Aerospace, which filed for protection from creditors late in 2018, has drawn expressions of interest from 19 international bidders, the company said on Wednesday.
“Bids came in a bit from all over the world but especially from North America, Europe and the Far East,” the company’s special administrator Vincenzo Nicastro said in a statement.
Nicastro said the vast majority of bidders were interested in taking over the company as a whole, adding the aim was to find a new owner for the group before the end of the year.
The maker of planes and drones has an order book worth 640m euros while other contracts for 260m euros are at different stages of negotiation, the company said. (Source: Reuters)
03 Jun 20. France nears 1bn-euro crisis fund for aero suppliers – sources. French government and industry officials are negotiating a 1bn-euro, privately led investment fund for small aerospace suppliers in which major manufacturers could invest 200m euros, people familiar with the proposals said on Wednesday.
FILE PHOTO: The logo of Airbus is pictured at the entrance of the Airbus facility in Bouguenais, near Nantes, France April 27, 2020. REUTERS/Stephane Mahe
The scheme mirrors government-backed plans in France to help the automobile sector and comes as the aerospace industry seeks funding to help suppliers to overcome the coronavirus crisis.
Aircraft production has virtually halted since the pandemic shut down most travel, and many suppliers urgently need cash.
If adopted, the new “Aerofund 4” would follow on the heels of three similar packages for the industry dating back to 2004 and represent the largest effort to prop up one of France’s key export sectors.
Under current proposals, four companies – planemakers Airbus (AIR.PA) and Dassault Aviation (AVMD.PA), engine maker Safran (SAF.PA) and avionics firm Thales (TCFP.PA) would contribute a fifth of the fund’s €1bn target, the sources said.
But there have been divisions over the best approach and no final sum has been agreed.
“It’s being discussed; it isn’t done yet,”‘ one source said.
One lawmaker said the fund could hold 1bn euros, but that negotiations were ongoing.
France’s GIFAS aerospace industry association, which is coordinating efforts by the aerospace companies to support the supply chain, could not be reached for comment.
The proposed €200m industrial contribution could be matched by private equity fund Tikehau Capital, whose ACE Management unit managed earlier aerospace funds, though it has not yet been formally appointed.
Tikehau declined to comment.
France’s BPI state bank could put up some 100m euros with the rest to be raised externally, one of the sources said. (Source: Reuters)
03 Jun 20. Chemring backs annual outlook as half-year profit jumps on new orders. British defence contractor Chemring Group (CHG.L) on Wednesday stood by its annual targets and posted a jump in half-year profit, as it won new orders from the United States despite the coronavirus crisis.
Chemring said its order book was strong and about 95% of the expected revenue for the second-half of the year has been delivered to date, after its underlying profit before tax rose to 24.2m pounds in the six months to April 30, from 9.9 m pounds a year earlier.
“H1 performance was ahead of our expectations reflecting strong performance in both segments and some positive timing differences,” the company said.
Order intake rose 1% to £250m in the first half, leaving the company with an order book of £504m.
The company said it has received additional delivery orders worth $32 m for the next phase of the Husky Mounted Detection System IDIQ from the United States, besides winning a U.S. Navy contract in May, which is expected to be worth up to $100m over 5-10 years.
Chemring, which employs about 2,500 people worldwide, said all its businesses have remained open despite COVID-19 challenges.
The London-listed company also reduced its debt pile by 30% to 60.6m pounds as of April-end and raised interim dividend by 8% to 1.3 pence per share. (Source: Reuters)
02 Jun 20. BWXT Divests U.S. Nuclear Services Portfolio. BWX Technologies, Inc. (NYSE: BWXT) announced today it has completed the process to divest its United States-based commercial nuclear services business to Framatome. In a cashless transaction, BWXT will receive a 118,000-square-foot manufacturing facility and the associated 11 acres of land from Framatome.
“This strategic divestiture implies a sharper focus on our core government nuclear manufacturing and site operations businesses,” said Rex Geveden, BWXT’s president and chief executive officer. “Adding a premier nuclear-qualified manufacturing facility to our footprint also enables expansion into space and defense microreactors.”
Under the terms of the agreement, BWXT will transition certain contracts, equipment and intellectual property to Framatome. BWXT will assume occupancy and ownership of the Framatome facility located near one of BWXT’s Virginia manufacturing sites.
BWXT’s Canadian-based nuclear manufacturing and services business is not part of this transaction and will continue its work in North America and overseas. North Inlet Advisors, LLC served as financial advisor to BWXT for this transaction. (Source: BUSINESS WIRE)
01 Jun 20. Boeing takes Embraer to arbitration over failed aviation deal. Boeing Co (BA.N) has taken former partner Embraer SA (EMBR3.SA) to arbitration over a failed $4.2bn (3.4bn pounds) deal, the Brazilian planemaker said in a securities filing on Monday night.
So far, it has only been publicly known that Embraer had taken Boeing to arbitration, angered by how the U.S. planemaker abruptly broke off that deal in April after years of working together. Boeing did not immediately respond to a request for comment. (Source: Reuters)
01 Jun 20. Embraer says China, India are potential partners after failed Boeing deal. Brazil’s Embraer SA (EMBR3.SA) said on Monday that China and India could be potential new partners, following a Reuters report last week that said those two countries as well as Russia were interested in the planemaker’s commercial jets division.
Embraer is dealing with the abrupt collapse of a planned deal with Boeing Co (BA.N) in April that left the company scrambling for a plan B.
Embraer Chief Executive Francisco Gomes Neto said in an earnings call that it was still early to discuss new opportunities in detail as the company is studying a new five-year plan. He added that partnerships could involve products, engineering and production.
Gomes Neto named China and India as potential partners, as well as unnamed “other countries.”
Embraer said ahead of the earnings call, however, that it was not currently negotiating with China’s state-owned COMAC, Russia’s Irkut or India on any potential deal to replace the one with Boeing, adding that it regularly evaluates potential partnerships.
The company reported a $292m first-quarter loss on Monday due to weak demand amid the coronavirus pandemic and the impact of the failed deal with Boeing.
Embraer also said it was seeking new liquidity. Reuters reported that Brazilian development bank BNDES is helping coordinate a $600m loan for the planemaker, which burned through $677m in cash in the quarter.
The firm said its decision to put staff on paid leave in January in order to finalize details of the Boeing deal was largely responsible for a 23% drop in revenue. In March, Embraer again put workers on leave due to the coronavirus pandemic. Executives declined to comment on an arbitration process against Boeing due to its cancellation of the deal. But the company did say that it expects to recover from Boeing tax costs related to the deal that negatively affected Embraer’s quarterly results. (Source: Reuters)
01 Jun 20. A partial sale of a Somerset-based aerospace business has safeguarded 40 skilled jobs, but 56 redundancies have also been made after a buyer could not be found for the remaining parts of the company.
The joint administrators of Tods Aerospace have completed the partial sale to defence engineering group Cobham Mission Systems (Cobham).
Andrew Sheridan and Geoff Rowley, partners at specialist business advisory firm FRP, were appointed as joint administrators at the start of March.
They have since operated Tods Aerospace, complete with health and safety procedures in place, through the current Covid-19 pandemic to deliver their mission-critical products to the aerospace and defence industries.
Established in 1932 as W&J Tod Ltd, Tods Aerospace specialises in the design and manufacture of specialist composite structures for use in the aerospace and defence industries, and has over a long period supplied products to many of the sector’s leading companies.
Following a marketing process, the joint administrators have now sold the defence division of Tods Aerospace Limited, including its associated intellectual property and assets, to Cobham. The transaction will TUPE-transfer 40 engineering, design and manufacturing jobs.
FRP’s Andrew Sheridan said: “Operating through administration is a challenge for any business, let alone a cutting-edge manufacturer during the Covid-19 pandemic. It is an incredible achievement for all the team at Tods Aerospace. Cobham offers an exciting new future for Tods Aerospace’s defence division and we wish the team all the best as they join the fold at a world-class global engineering group.
The purchase of the Cropmead facility of Tods Aerospace was said to be aligned with Cobham’s strategy of strengthening its core aerospace and defence capabilities and is the first acquisition by Cobham under the ownership of Advent International.
Kevin McKeown, chief executive of Cobham Mission Systems, said: “Tods Aerospace’s capabilities in specialist composite structures are highly complementary to Cobham’s core aerospace and defence business. We are confident that through the right investment, and leveraging the world-class engineering expertise within Cobham, we can build a foundation for long-term success.”
Without a buyer for the remaining parts of the business, 56 staff have been made redundant. Nine staff have been retained in the short-term to assist the administrators with the rest of their duties.
Sheridan added: “Regrettably, the sale we were negotiating of the commercial aviation division of Tods Aerospace, ultimately fell victim to the global downturn in the sector resulting from the pandemic. We are now working with the Redundancy Payments Service to support all affected employees.”
Unitech Aerospace, the group company, and its other subsidiaries are not part of the administration. (Source: Google/https://www.insidermedia.com/)
29 May 20. Brazil’s Embraer draws foreign interest after Boeing rift – sources. Aircraft makers are circling Brazil’s Embraer (EMBR3.SA) weeks after Boeing (BA.N) ditched plans for a historic commercial aviation tie-up, people familiar with the matter said.
Boeing axed plans to buy 80% of Embraer’s commercial unit in April, ending a planned move into regional jets that mirrored rival Airbus’ (AIR.PA) purchase in 2018 of a competing model developed by Canada’s Bombardier.
China’s state-owned COMAC planemaker has voiced informal interest in co-operation with the world’s third-largest jetmaker, two of the people said. Russian aircraft manufacturer Irkut has also explored the issue, two others said, though the company denied any current interest.
India, another rising aerospace power focusing mainly on defence but with a huge civil market, has informally conveyed interest at government level while still studying the matter, sources said.
That places Embraer’s fate at the centre of the so-called BRIC group of nations, with each honing aerospace strategies as Airbus (AIR.PA) and Boeing (BA.N) reel from the coronavirus crisis.
Embraer shares rose around 8% immediately after publication of the Reuters report, with trading halted momentarily in New York due to excess volatility.
China’s COMAC and the Indian and Brazilian governments did not reply to requests for comment.
An Irkut spokeswoman denied interest in Embraer. The Brazilian planemaker declined to comment.
Both COMAC and Irkut are developing aircraft to compete directly with Airbus and Boeing in the busy 150-seat market. China’s plans are considered the most advanced.
A deal with Embraer would add engineering resources and global support but also clash with smaller and commercially less successful regional jets developed by both countries.
A Russian industry source said Irkut’s ultimate parent Rostec is focusing on its existing MS-21, designed to compete with Airbus and Boeing, and Superjet regional aircraft.
Although it has invested heavily in parts and maintenance, India is the least visible suitor in commercial aerospace with no active project other than a 14-seater jet dubbed SARAS.
But India has a potential requirement for developing an 80-90-seat regional jet – a category occupied by Embraer – for Prime Minister Narendra Modi’s signature UDAN project to expand air services to small towns.
Embraer is also seen as a one-off chance to rebalance India’s aerospace ambitions against strategic rival China.
R.K. Tyagi, ex-chairman of state-run Hindustan Aeronautics, said he had written to the government urging it to move fast.
“Any country with ambitions will look at this. I feel this is a good opportunity. Valuation is down and if we get control of a modern, proven aircraft programme, it is a big jump.”
Modi administration officials and a government thinktank are preparing a strategy paper on Embraer but no formal approach has yet been made, an official aware of the plans said.
“The situation at Embraer is fairly bad, share value is drastically eroded; there would be many countries showing interest in this including us,” the official said.
Although Embraer says it can rebound, aircraft buyers have said it lacks deep enough pockets to counter Airbus’s powerful commercial backing for the Canadian-designed A220.
Embraer’s jetliner boss said on May 1 the company had not initiated talks with anyone, but that he could not “legislate for the inbound calls that could come.”
Embraer has said it will consider its next moves carefully. A major headache for the company is a valuation down 64% this year, underperforming the crisis-hit aviation sector.
Embraer may be reluctant to yield to bargain-hunters, but with aviation in shock globally from the pandemic, its options remain limited even though it is the only available full-scale manufacturer, Teal Group analyst Richard Aboulafia said.
“Embraer is a fantastic commercial prime (contractor) but very few people are trying to buy a commercial prime,” he said.
Privatised in the 1990s, Embraer remains close to Brazil’s government, which can veto strategic decisions.
Any negotiation with China, Russia or India would require a slow and methodical process to put everyone at ease, said Oliver Stuenkel, a professor at the Getulio Vargas Foundation and expert on the BRICS group that since 2010 includes South Africa.
Tensions with China have risen since Brazil’s right-wing President Jair Bolsonaro took over last year, while Brazil has deepened ties with India in various sectors.
Stuenkel does not expect resistance to China, Russia or India from Brazil’s politicians. But he said Bolsonaro might not want to be linked publicly to any talks with China and would likely enlist his vice-president, retired general Hamilton Mourao, who has already backed Embraer having a Chinese partner.
“Bolsonaro does not want to be seen as the one who sold Embraer to the Chinese,” Stuenkel said.
Other industry analysts cautioned that while China has discussed buying major aerospace assets in the past, including the Canadian jet that eventually went to Airbus and became the A220, but has completed relatively few acquisitions. (Source: Reuters)
03 Jun 20. EOS completes acquisition of SATCOM business. Canberra-based EOS has announced the successful completion of the acquisition of a satellite communications business, Audacy Corporation, as well as two technical initiatives as part of an expansion of the company’s communication systems business.
In late-January, EOS announced it had entered into transaction agreements to acquire all of the business and assets of Audacy Corporation, a US-based satellite communications company.
The $10 million acquisition of Audacy was conducted via the wholly owned US subsidiary, EOS Defense Systems USA (EOSDS), and will build on the company’s production facility at Huntsville, Alabama. It will place particular focus on the areas of space, missile defence and space communications.
Audacy was granted a space station (satellite) spectrum licence by the US Federal Communications Commission (FCC) authorising it to use specific microwave spectrum bands for communications to, from and among specific satellites and ground-based communications stations
The acquisition was subject to commercial conditions as well as two separate approvals by agencies of the US government:
- The transfer of communication spectrum licenses from Audacy Corporation to EOS was subject to review and approval by the FCC; and
- The acquisition of a business operating multiple satellites in space is subject to review and approval by the US Committee on Foreign Investment in the US (CFIUS).
The FCC and CFIUS reviews have been completed by those agencies and all necessary US government approvals for completion of the acquisition have been formally received by EOS. All commercial conditions for closing have been met.
Dr Ben Greene, group CEO of EOS, welcomed the announcement of the acquisition in late January 2020, saying, “EOS has previously disclosed its intention to enter the space communications market, and the acquisition represents a logical next step towards that goal.”
The acquisition was completed on 28 May 2020. EOS will now move forward to deploy communication satellites in a constellation that EOS has named EOSLink.
The EOS strategic approach to space communications is based on the widely-held industry view that optical communications, where EOS has very advanced technology and strong capabilities, will carry the majority of space communication traffic by 2036.
EOS has established a space communications business with advanced technologies for both microwave and optical laser communications. In the long term, EOS expects most space-based communications to be implemented with optical communications – widely considered a disruptive technology that is not regulated or controlled because it does not interfere with other users.
Greene added at the time, “Over 50 potential customers have executed non-binding memoranda of understanding relating to the proposed space communications service, and EOS expects to finalise the initial constellation design soon so that those MoU can be progressively converted to service contracts after completion.
“The company will face challenges building and launching a new constellation of MEO satellites by June 2024. Therefore, satellite capacity and the related funding requirements will be scaled to meet regulatory and customer commitments. EOS will later decide whether to implement the new satellite constellation on its own or through a partnership with an existing space communications entity.”
This traffic is then expected to be around 100 times the volume of today, but will generate revenues for service providers at only the same level as today.
For the market segment EOS intends to service, which excludes broadcast and internet applications, this revenue currently exceeds $100bn annually. EOS intends to address a niche in this segment. (Source: Space Connect)
07 May 20. Kratos Reports First Quarter 2020 Financial Results.
First Quarter 2020 Revenues of $168.9m Increase 5.3% over First Quarter 2019 Revenues.
First Quarter Bookings of $213.1m and a Book-to-Bill Ratio of 1.3 to 1.0.
First Quarter 2020 Unmanned Systems Revenues of $42.0m
Increase 20.3% over First Quarter 2019 Revenues
Unmanned Systems Book-to-Bill Ratio for the First Quarter of 2020 of 1.5 to 1.0.
Kratos Defense & Security Solutions, Inc. (Nasdaq:KTOS), a leading National Security Solutions provider, today reported its first quarter 2020 financial results. For the first quarter of 2020, Kratos reported Revenues of $168.9m, a 5.3% increase over the first quarter of 2019, and first quarter 2020 Adjusted EBITDA of $16.3 m, a 6.9% decrease over the first quarter of 2019, reflecting increased research and development investments of approximately $1.8 m, primarily in the Company’s space and satellite communications business related to investments in new software-based and open space platforms and technologies. Operating Income of $4.7m for the first quarter of 2020 includes an increase in non-cash stock based compensation expense of $2.1m and an increase in depreciation expense of $0.8m. First quarter 2020 Cash Flow generated from Operations was $4.0m, and Free Cash Flow from Operations was a use of $2.4m after the funding of $6.4m of capital expenditures. Cash used to fund strategic acquisitions was $14.2m. Adjusted EPS* was $0.09 for the first quarter of 2020, compared to $0.11 for the first quarter of 2019. Kratos reported a first quarter 2020 Net Loss of $0.2 m, and GAAP EPS was a loss of $0.00 for the first quarter of 2020.
For the first quarter of 2020, Kratos’ Unmanned Systems Segment (KUS) reported Revenues of $42.0m, an increase of $7.1m, or 20.3%, over the first quarter of 2019, and Adjusted EBITDA of $2.3m, an increase of 15.0%, over first quarter 2019 Adjusted EBITDA of $2.0m. KUS’s book-to-bill ratio for the first quarter of 2020 was 1.5 to 1.0 and for the last twelve months ended March 29, 2020 was 1.2 to 1.0. Total backlog for KUS at the end of the first quarter of 2020 was $174.4m.
For the first quarter of 2020, Kratos’ Government Solutions Segment (KGS) reported Revenues of $126.9m, up from $125.5m in the first quarter of 2019. Organic revenue growth in the first quarter of 2020 in our Microwave Products and Rocket System businesses and the inclusion of a full quarter’s financial performance of our turbine technologies business, were offset primarily by expected declines in our training solutions business and legacy government services business. First quarter 2020 KGS Adjusted EBITDA of $14.0m decreased from $15.5m in the first quarter of 2019, primarily as a result of a less favorable mix of revenues. For the first quarter of 2020, KGS reported bookings of $151.0m and a book-to-bill ratio of 1.2 to 1.0, with bookings of $542.1m and a book to bill ratio of 1.0 to 1.0, in the last twelve months ended March 29, 2020.
For the first quarter of 2020, Kratos reported consolidated bookings of $213.1m and a book-to-bill ratio of 1.3 to 1.0, with bookings of $751.1 m and a book-to-bill ratio of 1.0 to 1.0, in the last twelve months ended March 29, 2020. Backlog at March 29, 2020 was $646.8m, up $45.6m, or 7.6%, from the backlog at December 29, 2019. Kratos’ bid and proposal pipeline remained consistent as compared to year-end, at $7.7bn at March 29, 2020.
Eric DeMarco, Kratos’ President and CEO, said, “As Kratos addresses the challenges presented by COVID-19, we remain focused on providing mission critical, affordable, leading technology systems and solutions for our national security mission, while maintaining a safe and healthy environment for our employees. I am extremely proud of the commitment of Kratos employees to our customers and country and the value they continue to create for our Company and its shareholders in the current environment. In the first quarter, Kratos Unmanned Systems, Space and Satellite Communications, Microwave Electronics, C5ISR and Rocket System DoD focused businesses performed particularly well, with strong Q1 bookings providing increased future visibility.”
Mr. DeMarco concluded, “Since our last financial report, we have continued to execute our business plan, including important progress with Kratos’ tactical unmanned aerial drone system programs and initiatives, including Valkyrie, Gremlins, Air Wolf, Thanatos and Mako. Kratos is now involved in several new major DoD programs, including OPIR, GBSD, ABMS, Skyborg, Golden Horde and Vanguard, which we believe reflects the alignment of our business portfolio with the future national security priorities of the U.S. and its Allies.”
We are providing initial Second Quarter 2020 guidance for Revenues of $160m to $170m and Adjusted EBITDA of $12 m to $16m.
We are affirming our full year 2020 Adjusted EBITDA guidance of $72m to $78m and we are affirming our full year 2020 Free Cash Flow guidance of generation of $7m to a use of $18m, including capital expenditures of $40 to $45m.
We are adjusting our full year 2020 revenue guidance from $740m to $780m, to $720m to $760m, primarily to reflect the expected impact of COVID-19 on our business, vendors, suppliers and customers (1), the non-renewal of an option on a sole source training contract by an international customer and the extension through the end of 2020 of a previously protested U.S. Navy/RSNF Training Contract. Including our first quarter bookings, our affirmed Adjusted EBITDA guidance reflects an overall forecasted improved revenue mix and profitability in our DoD and National Security business areas, including in our space, satellite, unmanned systems and microwave electronic operations.
Kratos’ fiscal year 2020 guidance excludes any potential contribution from expected Valkyrie or other tactical drone production or system contracts, with expected orders to be taken into consideration and our financial forecast adjusted once such contracts/orders are received and the related financial contribution can be estimated.
The 2020 capital expenditure forecast currently includes expected outlays of $15 to $17m associated with the production of 12 Valkyrie aircraft prior to receipt of expected customer award(s); therefore, these aircraft will be reflected as Company-owned tactical drones until receipt of the related customer award(s), and approximately $5m related to the production of Company-owned aerial target drone systems in preparation for fulfilling forecasted customer requirements. Kratos will adjust/reduce these initial forecasted capital expenditure outlays once expected customer orders are received and the related financial contribution can be estimated.
(1) The company’s 2020 financial outlook includes updated guidance for net sales reflecting the currently expected impacts related to COVID-19. The ultimate impact of the Global COVID-19 Pandemic on the company’s financial outlook for 2020 remains uncertain. (Source: Armada)