Sponsored by TCI International Inc.
30 Oct 20. FLIR Systems Announces Third Quarter 2020 Financial Results.
– Third Quarter Revenue of $466.4m
– Total Backlog of $898.7m
– Third Quarter GAAP Diluted Earnings Per Share (“EPS”) of $0.46
– Third Quarter Adjusted Diluted EPS of $0.64
– Re-Initiates Full Year Fiscal 2020 Forward Guidance
FLIR Systems, Inc. (NASDAQ: FLIR) (“FLIR” or the “Company”), a world leader in the design, manufacture, and marketing of intelligent sensing technologies, today announced financial results for the third quarter ended September 30, 2020.
Commenting on FLIR’s third quarter results, Jim Cannon, President and Chief Executive Officer, said, “I’m pleased with our third quarter results despite dynamic macro-economic conditions arising from the pandemic across some of the end markets we serve. We delivered important program wins, brought innovative new products to market, and on a year over year basis, expanded margins and drove earnings growth. Total backlog of $899m remained at near-record levels, up 10.9% from the prior year quarter. In addition, we continue to realize expense savings through the ongoing execution of Project Be Ready, which aims to help our business profitably scale over the longer term while reducing costs in the near term. As a result, we improved adjusted operating margins by 110 basis points and adjusted net income by nearly 8% from the third quarter last year. As momentum continues to build across the enterprise, we believe our third quarter performance provides further evidence that the strategic pivot we embarked upon two years ago is working.”
Mr. Cannon concluded, “Based on our learnings from operating in the COVID-19 environment, our results year-to-date and outlook for the remainder of the fourth quarter, today we are re-initiating guidance for the full year 2020. Importantly, we expect to achieve year-over-year improvement in adjusted earnings per diluted share in 2020. Our commitment to driving value for shareholders remains at the forefront of everything we do and I feel confident that FLIR is well-positioned as we look to the future.”
Revenues for the quarter were $466.4m, compared to $471.2m the prior year quarter. Bookings totaled $451.2m in the quarter, representing a book-to-bill ratio of 0.97. Backlog at the end of the quarter was $898.7m, reflecting a 10.9% increase relative to the prior year quarter.
GAAP Earnings Results
Gross profit for the quarter was $228.9m, compared to $229.7m in the prior year quarter. Gross margin increased to 49.1% from 48.8% in the prior year quarter, primarily attributable to favorable product mix in the Industrial Technologies segment, partially offset by the ramp up of lower margin programs in the Defense Technologies segment. Earnings from operations for the quarter was $86.6m, compared to $74.4m in the prior year quarter. Operating margin increased to 18.6% from 15.8% in the prior year quarter, primarily as a result of decreases in intangible asset amortization, transaction and integration costs, and other operating expense reductions from Project Be Ready as well as marketing and travel costs, partially offset by an increase in deferred compensation costs. Diluted EPS was $0.46, compared to $0.46 in the prior year quarter. The weighted average diluted share count for the quarter was 132m, down from 136m in the prior year quarter primarily due to stock repurchase activity initiated in the first quarter of 2020.
Non-GAAP Earnings Results
Adjusted gross profit for the quarter was $238.5m, compared to $239.9m in the prior year quarter. Adjusted gross margin increased to 51.1% from 50.9% in the prior year quarter, primarily attributable to favorable product mix in the Industrial Technologies segment, partially offset by the ramp up of lower margin programs in the Defense Technologies segment. Adjusted operating income for the quarter was $104.8m, compared to $100.8 m in the prior year quarter. Adjusted operating margin increased to 22.5% from 21.4% in the prior year quarter, primarily as a result of operating expense reductions from Project Be Ready as well as decreases in marketing and travel costs; partially offset by an increase in deferred compensation costs. Adjusted diluted EPS was $0.64, compared to $0.58 in the prior year quarter.
Industrial Technologies Segment
Industrial Technologies revenues for the quarter were $281.1 m, representing an increase of $23.2m, or 9.0% compared to the prior year quarter. The increase was primarily attributable to heightened demand for EST solutions as a result of the COVID-19 pandemic and an increase in maritime product sales, partially offset by lower volume in other commercial end markets such as security products.
Industrial Technologies segment operating income was $87.7m, compared to $63.7m in the prior year quarter. Segment operating margin increased to 31.2% from 24.7% in the prior year quarter, primarily attributable to the aforementioned higher revenue and associated gross profit, favorable product mix, and operating expense reductions from Project Be Ready as well as lower marketing and travel costs.
Industrial Technologies bookings totaled $274.0m for the quarter, representing a book-to-bill ratio of 0.97. Backlog at the end of the quarter was $342.4m, reflecting a 25.1% increase relative to the prior year quarter, primarily as a result of award timing and an increased volume of long term orders.
Defense Technologies Segment
Defense Technologies revenues for the quarter of $185.3m decreased by $28.0m, or 13.1% compared to the prior year quarter. The revenue decrease was primarily attributable to shipment timing and the completion of certain contracts that contributed to revenue in the prior year quarter, partially offset by increased volumes for unmanned systems.
Defense Technologies segment operating income was $38.8m, compared to $53.8m in the prior year quarter. Segment operating margin decreased to 20.9% from 25.2% in the prior year quarter, primarily attributable to the aforementioned lower revenue and associated gross profit, partially offset by operating expense reductions from Project Be Ready as well as lower marketing and travel costs.
Defense Technologies bookings totaled $177.1m for the quarter, representing a book-to-bill ratio of 0.96. Backlog at the end of the quarter was $556.3m, reflecting a 3.6% increase relative to the prior year quarter, primarily as a result of increased orders in unmanned systems.
Balance Sheet and Liquidity
FLIR ended the third quarter of 2020 with $320.0m in cash and cash equivalents and approximately $443m in borrowing capacity under its credit facility based on current profitability levels and leverage covenants.
On August 3, 2020, the Company completed its previously announced public offering of $500 m aggregate principal amount 2.5% notes due August 1, 2030 (the “2030 Notes”). The aggregate net proceeds from the offering were approximately $494.2m after deducting underwriting fees, debt discount and transaction issuance costs, which are being amortized over a period of ten years. Interest on the 2030 Notes is payable semiannually in arrears on February 1 and August 1 of each year beginning on February 1, 2021. The proceeds from the sale of the 2030 Notes were used to redeem the Company’s outstanding $425.0 m senior unsecured notes due June 15, 2021 and for general corporate purposes.
As previously announced, FLIR’s businesses have been deemed essential for critical infrastructure under the Cybersecurity and Infrastructure Security Agency exemption, and all of its manufacturing facilities remain operational. FLIR has implemented stringent safety protocols and continues to monitor recommendations and guidelines issued by the Centers for Disease Control, the European Centre for Disease Prevention, and the World Health Organization to ensure the health and safety of its employees.
Given the high degree of uncertainty in the current macroeconomic environment resulting from COVID-19, the Company remains focused on cash optimization activities, disciplined capital allocation, and executing Project Be Ready to simplify its product portfolio and better align resources with higher growth opportunities while reducing costs.
Shareholder Return Activity
FLIR’s Board of Directors has declared a quarterly cash dividend of $0.17 per share on FLIR common stock payable on December 4, 2020 to shareholders of record as of close of business on November 20, 2020.
28 Oct 20. Austal to acquire BSE Maritime Solutions. The shipbuilding company has entered into an agreement to acquire Australian-based BSE Maritime Solutions, in a bid to expand its global support business.
Austal has acquired ship repair and support business BSE Maritime Solutions Group for an estimated $27.5m.
BSE, which currently supports the Australian Border Force, BAE Systems, Thales and Svitzer, employs approximately 60 permanent staff who will be offered employment with Austal.
As part of the acquisition, Austal will acquire all of the shares in BSE, Brisbane Slipway Holdings, and Brisbane Slipways and Engineering.
The purchase will be funded from Austal’s cash reserves, with the company holding a $272.4m net cash position as at 30 June 2020.
The agreement, which is subject to a number of customary conditions, is expected to be completed at the end of November 2020.
According to Austal, the acquisition is part of a broader strategy to strengthen the company’s key support business, which has grown at an annual rate of 28 per cent over the past four years, closing the 2020 financial year (FY20) at $360 million.
“BSE Maritime Solutions is a quality business and its acquisition aligns with our stated strategy of growing our support division, adding further scale to our operations on the east coast of Australia in addition to our existing support services at Henderson, Cairns, and Darwin,” Austal CEO David Singleton said.
“In particular, the acquisition provides Austal with dockyard and ship lift capability in the north-east region of Australia – including the Pacific’s largest mobile boat hoist, capable of moving 1,120 tonnes – supporting our existing and future customers and reinforcing our commitment to grow in the region.
“It further enhances our in-service support capabilities, currently provided across multiple facilities in Cairns, for the Austal designed and constructed Cape Class and Guardian Cass patrol boats.”
Austal said it expects the new business to generate $5m in gross earnings over FY21, rising to $11m by FY25 as more Austal ships covered by current sustainment contracts are delivered to the Commonwealth of Australia. (Source: Defence Connect)
30 Oct 20. archTIS acquires global information protection business Nucleus Cyber. Canberra-based cyber security business archTIS has announced the acquisition of global information protection business Nucleus Cyber worth $9.75m.
This acquisition will see the formation of a global, geographically diverse cybersecurity company that supports archTIS’s strategy of becoming one of the world’s premier provider of policy enforced access control platforms for securing and sharing digital information.
Nucleus Cyber nad archTIS have entered into a binding term sheet which sets out the key terms upon which the acquisition is expected to be completed. Under the terms of the agreement, archTIS will acquire a 100 per cent interest in Nucleus Cyber in exchange for:
- Initial consideration of $6.25m, payable in archTIS shares (subject to standard closing adjustments); plus
- Up to $3.5m deferred consideration payable in archTIS shares upon reaching certain defined revenue and corporate milestones.
The acquisition is highly strategic and transformational for archTIS. Through this acquisition, archTIS gains an immediate presence in the key North American market, as well as access to the Microsoft business product suite.
The new combined product offering creates increased revenue diversity, greater recurring revenues, and a platform for accelerated growth.
Utilising a scrip swap deal, archTIS remains in a strong cash position with circa $4mcash at hand plus a further $1m cash proceeds expected from exercise of expiring options by July 2021.
Key Nucleus Cyber team members will join the archTIS senior executive team, significantly enhancing our North American and Microsoft product suite expertise.
Daniel Lai, archTIS CEO, said, “This acquisition is transformative for archTIS. The acquisition of Nucleus Cyber expands our offering into the Microsoft business product suite and opens up new global sales and distribution channels and provides significant new revenue streams to the business.”
The Nucleus Cyber business and team is well known to archTIS due to previous partnering agreements and represent a close cultural fit for our business. All key senior executives from Nucleus Cyber have agreed to join archTIS’ senior management team, significantly enhancing our North American and Microsoft product suite expertise.
“This forms a critical component of our global strategy of being the world’s premier provider of policy enforced access control platforms for securing and sharing digital information. We have known and worked with the Nucleus Cyber team for an extended period, and we look forward to welcoming them to the archTIS business and continuing to facilitate secure collaboration and information protection for our clients,” Lai added.
The company recently completed its first Nuclear Cyber licence sale to 12th Level; demonstrating the benefit the acquisition will provide to accelerate cross-sales.
Kurt Mueffelmann, Nucleus Cyber CEO, expanded on the comments of Lai, saying, “We are excited to be joining archTIS. Nucleus Cyber and archTIS teams share a long relationship and common technology approach of using Attribute Based Access Control (ABAC) in securing sensitive information. Secure information sharing across enterprise and government is an ongoing problem, exacerbated by the exponential increase in remote work and the use of Microsoft’s collaboration tools that have been fuelled by the pandemic.
“The combination of archTIS and Nucleus Cyber technologies and talent ensures we are at the forefront of providing market-leading information security solutions. I look forward to joining archTIS as its chief operating officer and continuing to accelerate our growth.”
Completion of the transaction remains subject to standard documentation and is expected to close before the end of calendar year 2020.
ArchTIS is an award-winning, global technology company focused on protecting sensitive information. Leveraging its strong pedigree with government and Defence, the company has developed industry-leading information security platforms for sharing and collaborating on sensitive or classified information.
Nucleus Cyber is headquartered in Boston, Massachusetts, with a development office in Melbourne. The company generates revenue from its high-margin annual subscription-based software platform, with high-quality enterprise clients that have a historically strong customer retention.
Nucleus Cyber provides advanced information protection solutions that prevent data loss and protect against insider threats across the Microsoft software suite. Microsoft is the world’s largest supplier of digital collaboration products to government, enterprise and SMEs including 115 million daily Teams users, and the Nucleus Cyber technology solutions operate seamlessly in conjunction with these products.
For example, the company’s NC Protect solution provides a simpler, faster and cheaper solution to tailor information protection for file sharing, messaging and chat across collaboration tools.
For mid-size to large enterprises and regulated industries, it protects business-critical content in cloud collaboration tools Microsoft Office 365 – SharePoint, Teams, OneDrive, Exchange, and Yammer, plus Dropbox, Nutanix Files and Windows file shares.
Nucleus Cyber has high quality customers in a wide range of industries across government and defence, financial services, healthcare, pharmaceuticals, energy and manufacturing including: Corning, State Street Bank, the Australian Department of Health, the Australian Department of Defence, and Care First.
Of material note, Nucleus Cyber has recently entered into a co-sell agreement with Microsoft. This means Microsoft will actively promote and sell Nucleus Cyber’s Protect product throughout the Microsoft field sales and channel resellers.
This agreement has just commenced in the US and is intended to expand globally through the Microsoft Start-up program. As a result, archTIS expects significant growth in this revenue stream from 2021. (Source: Defence Connect)
29 Oct 20. Redwire Acquires Roccor, A Manufacturer Of Critical Systems For The Satellite Industry. Redwire, a new leader in mission critical space solutions and high reliability components for the next generation space economy, announced today that it has acquired Roccor, a disruptive military and commercial hardware supplier in the rapidly growing small satellite market and a premier manufacturer of deployable booms, structures, antennas, thermal products, and solar arrays for the space industry. Terms of the transaction were not disclosed.
“Roccor is exactly the type of company we are looking to add to the Redwire platform—a proven, growth company with a list of top-tier customers, that is also an industry disruptor,” said Peter Cannito, chairman and CEO of Redwire. “We are very excited to work closely with the talented Roccor team to build on their tremendous success and accelerate their advanced technologies.”
“Redwire is an exciting company at the forefront of space innovation and development and joining the platform will present Roccor with new opportunities that will lead to the next level of growth,” said Chris Pearson, who will continue to lead Roccor as President. “The global satellite industry is growing rapidly, and the financial and operational support from Redwire and AE Industrial will allow us to keep pace with the demands of a constantly evolving industry.”
Founded in 2012, Roccor is a fast-growing manufacturer and supplier of high-reliability satellite technologies, solutions, and products. The company’s cutting-edge capabilities address cost and performance limitations that are helping to revolutionize spaceflight and are currently being utilized on missions with NASA, the Department of Defense, and several commercial space companies. Based in Colorado, Roccor has a proven performance record with over 75 successfully launched systems in orbit today with additional systems planned to launch next year.
Roccor marks the fourth acquisition by Redwire this year. Redwire was formed in June 2020 following the strategic acquisition of Deep Space Systems and Adcole Space by AE Industrial Partners, LP, a private equity firm specializing in aerospace, defense and government services, power generation, and the specialty industrial markets. Redwire subsequently acquired Made In Space in June, a leader in on-orbit space manufacturing technology.
With the acquisition of Roccor, the Redwire technology portfolio will expand to include high performance and low-cost deployable structure systems designed for commercial and military satellites. Roccor’s specialized products, including stand-alone booms, hinges, solar arrays, and antennas, will augment Redwire’s current space infrastructure solutions to offer more innovative capabilities and deliver even greater performance at substantially lower costs for its customers.
“AE Industrial set out to build Redwire because we recognized a need to bring together fast-growing yet established innovators with companies that possess extensive flight heritage,” said Kirk Konert, partner at AEI. “Roccor brings added capabilities, an impressive customer list, and an incredible workforce that we are confident will achieve amazing results as part of Redwire.”
PricewaterhouseCoopers LLP served as the financial advisor and Kirkland & Ellis LLP served as the legal advisor to Redwire. Sparks Willson, P.C. was the legal advisor and Near Earth LLC served as the financial advisor to Roccor.
Redwire is a new leader in mission critical space solutions and high reliability components for the next generation space economy. With decades of flight heritage combined with the agile and innovative culture of a commercial space platform, Redwire is uniquely positioned to assist its customers in solving the complex challenges of future space missions. For more information, please visit www.redwire.space.
Roccor was founded in 2012 and is based in Longmont, Colorado. It is a fast-growing, vibrant, high technology supplier into the aerospace and terrestrial military markets. Roccor’s novel designs address cost and performance limitations to revolutionize spaceflight and military operations. The company has contracts with NASA, the U.S. military, and commercial space companies all around the world and already has several deployable systems on orbit and with numerous additional systems delivered and planned for launch in 2020. Visit Roccor at www.roccor.com.
About AE Industrial Partners
AE Industrial Partners is a private equity firm specializing in Aerospace, Defense & Government Services, Power Generation, and Specialty Industrial markets. AE Industrial Partners invests in market-leading companies that can benefit from its deep industry knowledge, operating experience, and relationships throughout its target markets. Learn more at www.aeroequity.com.
(Source: PR Newswire)
29 Oct 20. Parsons to Acquire Braxton Science & Technology Group. Acquisition enhances space and cyber portfolios; Accretive to revenue growth and adjusted EBITDA margin. Parsons Corporation (NYSE:PSN) announced today that it has entered into a definitive agreement to acquire Braxton Science & Technology Group, LLC (BSTG) and its subsidiaries in a deal valued at $300 million ($258 million less the tax asset). The acquisition increases Parsons’ solutions, products, and capabilities in the space, cyber, and intelligence markets.
BSTG’s broad portfolio of commercial off-the-shelf products—as well as their sustainment of government off-the-shelf products—provide mission critical solutions including spacecraft ground control and spacecraft integration. BSTG has over 50 differentiated space-mission product offerings consisting of software and hardware products combined with advanced engineering services. Their leading product portfolio is built on a technology base of industry best practices for software development, cybersecurity, and domain expertise. BSTG will be integrated into Parsons’ space and geospatial solutions market, adding more than 370 employees, 80% of whom hold security clearances.
“The addition of BSTG complements our space portfolio, increases our product offerings in high-growth markets, and adds critical intellectual property that complements and expands our capabilities for the U.S. Air Force, Space Force, and research laboratories,” said Chuck Harrington, Parsons’ chairman and chief executive officer. “We look forward to welcoming BSTG’s employees into the Parsons’ family, driving synergistic solutions that leverage our expanded set of space solutions, growing our technology, and furthering our customer’s critical missions including joint all-domain operations.”
Headquartered in Colorado Springs, Colorado, BSTG operates at the forefront of satellite operations, ground system automation, flight dynamics, and spacecraft and antenna simulation for the U.S. Department of Defense and Intelligence Community. These capabilities position Parsons to capitalize on the quickly evolving space missions of its national security space customers and address rapid market growth driven by proliferated low earth orbit constellations, small satellite expansion, and space cyber resiliency. BSTG has specific domain expertise with the U.S. Space Force’s Enterprise Ground Services (EGS) effort: a next generation architecture that will unify spacecraft ground control operations across multiple major government agencies.
The transaction is consistent with Parsons’ strategy of acquiring high-growth, defense, and intelligence technology companies with software and hardware intellectual property that enhance its technology and transactional revenue growth and margin profile.
“The combination of our leading defense capabilities, and decades of trusted customer relationships, combined with Parsons’ global scale, cross-industry experience, and disruptive mindset creates a leading space technology provider,” said Ken O’Neil, president of BSTG. “We’re excited to join an organization known for their entrepreneurial spirit, agility, culture of innovation and inclusion, and successful track record of mergers, acquisitions, and integrations. Parsons is a large company with the operational agility of a smaller organization, which attracted us to them and gives us confidence in our future success together.”
The transaction is valued at approximately $258 million, including the net present value of a $42 million transaction-related tax benefit, or approximately 11x Braxton’s estimated 2021 adjusted EBITDA before considering any revenue or cost synergies. For 2021, Braxton is expected to generate revenue of approximately $133 million. The transaction is expected to be accretive to Parsons’ 2021 adjusted earnings per share and close in Q4 2020, subject to customary closing conditions. Parsons was advised by Goldman Sachs & Co. LLC and Latham & Watkins LLP. Braxton was advised by KippsDeSanto & Co. and Sparks Wilson, P.C. (Source: PR Newswire)
29 Oct 20. Hill Technical Solutions Forms Strategic Partnership with DC Capital Partners. Hill Technical Solutions, Inc (“HTSI” or the “Company”) announced today that it has formed a strategic partnership with DC Capital Partners (“DC Capital”), a private equity investment firm headquartered in Alexandria, Va., to enhance HTSI’s ability to expand its capabilities and grow its customer base.
HTSI is a leading provider of highly technical, full spectrum systems engineering and integration, advanced technology development, systems architecture design and analysis, and hypersonic design and testing solutions for the Missile Defense Agency, Army, Navy and Air Force. The Company is at the forefront of the effort to establish hypersonic technological superiority for the United States as it develops the next generation defense systems. HTSI’s highly skilled subject matter experts work closely with customers to understand specific problems and needs and then develop the solutions that allow their customers to achieve significant technological advances in the defense of the nation.
Thomas J. Campbell, Founder & Managing Partner of DC Capital, said, “HTSI is an exceptional company with an extremely talented management team and a highly skilled and experienced team of subject matter experts. We look forward to our partnership with Stacey and Brad Hill and their team as we all work to support our customers in the development of the next generation of defense systems. Our goal is to continue to grow the Company and expand existing capabilities to provide even more advanced solutions to our customers.”
Stacey Hill, HTSI’s CEO and Brad Hill, HTSI’s President, commented, “This is an exciting time for HTSI as we join the DC Capital family of businesses. Our Company and our employees have always been focused on our customers’ missions and our partnership with DC Capital will allow us to continue to grow and provide exceptional service to our growing list of customers across U.S. Government agencies. This partnership will also provide our employees with more personal and professional development opportunities as we continue to expand our business and our capabilities.”
Jeffrey C. Weber, a Partner at DC Capital, stated, “DC Capital looks forward to partnering with Stacey and Brad and the HTSI management team to execute the strategic plan that we have developed and to continue the growth of HTSI that this management has begun. HTSI plays a critical role in the defense of our Country and our goal is to continue to attract world class employees who can broaden the role that HTSI plays in providing solutions to its existing customers and help the Company expand to other U.S. Government customers.”
Duff & Phelps, LLC acted as financial advisor, and Holland & Knight, LLP acted as legal advisor to HTSI in connection with the transaction. Latham & Watkins, LLP acted as legal advisor to DC Capital. (Source: PR Newswire)
29 Oct 20. Arlington Capital Partners Announces the Formation of BlueHalo through the Combination of AEgis Technologies, Applied Technology Associates, and Brilligent Solutions. Arlington Capital Partners (“Arlington”) today announced the formation of BlueHalo (the “Company”), a leading provider of advanced engineering solutions and technology to the national security community. BlueHalo was formed through the combination of AEgis Technologies, including its previously integrated acquisitions Excivity and EMRC Heli (“AEgis”), an Arlington portfolio company, and its recently announced acquisitions of Applied Technology Associates (“ATA”), and Brilligent Solutions (“Brilligent”).
BlueHalo is purpose-built to provide industry leading capabilities in the domains of Space Superiority and Directed Energy, Missile Defense and C4ISR, and Cyber and Intelligence. The Company is an end-to-end lifecycle partner delivering technical expertise from R&D through deployment. BlueHalo seeks to deliver advanced engineering to address the most complex challenges facing the national security community.
“We are proud to bring together these exceptional companies to form BlueHalo,” said David Wodlinger, a Partner at Arlington Capital Partners. “BlueHalo will have the capabilities, infrastructure, and resources to rival the largest companies combined with the innovation, responsiveness, and world-class talent to provide superior solutions for our customers’ most challenging and complex missions.”
“Changing the landscape of our national security posture and developing capabilities that have never been offered before requires bringing together the highest end products and elite talent. At BlueHalo, our employees will have access to new and impactful programs and missions across the fields of directed energy, radar, SIGINT, laser comm, electro-optics, and complex space systems, as well as investments to accelerate both growth and innovation,” said Jonathan Moneymaker, CEO of BlueHalo. “The name BlueHalo speaks to who we are as a company, a global protective ring that shields everything we safeguard most, that unbroken line ensuring our customers retain the advantage in any battlespace, from high above the Earth to deep in cyberspace. It’s who we are, a halo, a protector, the light of inspired engineering keeping our Nation safe.”
Henry Albers, a Vice President at Arlington, said, “As a result of this unification of complementary companies, BlueHalo offers a broad set of capabilities addressing many of the highest priority missions of the national security community. We plan to invest heavily in technical talent, differentiated engineering and manufacturing facilities, and proprietary technology solutions as the Company embarks on its next phase of growth.”
BlueHalo is purpose-built to provide industry leading capabilities in the domains of Space Superiority and Directed Energy, Missile Defense and C4ISR, and Cyber and Intelligence. BlueHalo focuses on inspired engineering to develop, transition, and field next generation capabilities to solve the most complex challenges of our customers’ critical missions and reestablish our national security posture in the near-peer contested arena. (Source: BUSINESS WIRE)
29 Oct 20. BT raises guidance despite profit dip.
- Adjusted cash profits (Ebitda) dropped by 5 per cent in the six months to 30 September.
- Despite ongoing Covid-19 pressure, the telecoms giant has increased its guidance for full year adjusted cash profits from £7.2bn-7.5bn to £7.3bn-7.5bn.
The Covid-19 pandemic has proved a double-edged sword for BT (BT.A). On the one hand, demand for its broadband services has increased as we all spend a lot more time at home. The number of customers signed up for its ‘fibre to the premises’ (FTTP) swelled from 86,000 to 598,000 between June and September. But that has been offset by lower activity from enterprise customers and the cancellation of sporting events hitting revenue from its broadcasting business, BT Sport. As such, the telecoms giant saw its adjusted cash profits (Ebitda) dip by 5 per cent in the six months to 30 September to £3.7bn.
BT has indicated that the Covid-19 squeeze is likely to continue. On the consumer side of the business, it is flagging ongoing pressure on BT Sport, more price-conscious customers and lower mobile roaming activity. Meanwhile, it expects to see more insolvencies among its enterprise customers. But despite the challenging outlook, it has nudged up its guidance for full-year adjusted cash profits from £7.2bn-7.5bn to £7.3bn-7.5bn. The upper end of this range would represent a 5 per cent decline from last year, but BT is expecting adjusted cash profits to bounce back to at least £7.9bn – which was their pre-pandemic level – in 2022/23.
Maintaining, upgrading and expanding the UK’s telecoms infrastructure is a capital-intensive business and the group ploughed £1.1bn into its fixed and mobile networks in the first half of year – a 9 per cent increase from a year earlier. BT intends to spend £12bn to bring ‘full fibre’ broadband to 20m premises by the mid-to-late 2020s which is on top of plans to extend its 5G network. The latter has been complicated by the government’s decree that all Huawei equipment be removed by the end of 2027 – a move that BT estimates will cost it £500m to implement. In the meantime, it has signed a deal with Swedish company Ericisson (SE:ERIC-B) to help deploy 5G across major UK cities.
Despite higher capital expenditure, the group managed to keep its net debt (excluding lease liabilities) level with the March year-end position, although it still sits at a staggering £11.3bn. Balance sheet pressures have been somewhat eased by the suspension of dividend payments although BT still has to contend with a £4bn net pension deficit. While it does plan to reinstate the dividend next year at 7.7p per share, this is half the level it paid out in 2019. BT has long struggled to balance its capital expenditure obligations and shareholder rewards and Covid-19 arguably gave it the perfect excuse to cut its payout.
The market responded well to BT’s revised guidance, bidding the shares up by 6 per cent. But this must be set against a five-year downward slide that has left the shares languishing at just 108p and made BT vulnerable to a takeover. That potential outcome and the revived dividend means the shares are (just about) worth hanging onto. Hold. (Source: Investors Chronicle)
29 Oct 20. KBR Reports Strong Third Quarter 2020 Financial Results.
– Reports strong earnings, cash generation and book-to-bill; raises 2020 earnings and cash guidance
– Delivers continuing momentum and growth in high-end, enduring businesses
– Closes highly strategic Centauri acquisition
KBR, Inc. (NYSE: KBR), today announced strong third quarter 2020 financial results after another solid quarter of earnings, margin performance, bookings and cash generation.
“Our people, with their unwavering commitment, focus and agility, continue to deliver outstanding results for our customers and drive operational excellence amidst the global pandemic. Together, these attributes have the business performing across all key metrics – earnings, margins, cash and book-to-bill,” said Stuart Bradie, President and CEO of KBR. “Our strategy of advancing upmarket to expand high-end offerings is evident in the growth and bookings momentum realized across our space, technology, science and systems engineering businesses, underscoring the resilience of our business model and giving us the confidence to increase the fiscal 2020 cash and earnings guidance.”
Bradie continued, “We also took a major step forward in executing our strategy with the completion of the Centauri acquisition in early October, accelerating growth into critical national security missions and strengthening our position as a provider of high-end, digitally enabled solutions and technologies in attractive end markets.” The addition of Centauri is firmly aligned with KBR’s strategy to continually grow its business in differentiated, upmarket areas that provide attractive returns, growth and cash conversion. “We are pleased to welcome our Centauri colleagues to KBR and thank every member of our combined team of teams for their commitment to advancing our strategy to create long-term value for stakeholders.”
Summarized Third Quarter 2020 Financial Results
While revenue in the company’s high-end, technically differentiated businesses supporting space superiority, science and systems engineering increased during the quarter, overall revenue decreased primarily due to reduced activity in Middle East contingency operations and in the legacy Energy Solutions business due to previously announced portfolio shaping actions. Adjusted EBITDA and margins continue to be strong at 9% at the group level with ongoing healthy Government Solutions performance, superb Technology Solutions performance and Energy Solutions performance as planned. Year to date, the company reported $269 million of adjusted operating cash flow with all segments contributing at or above expectations. Book-to-bill of 1.1x for the company, excluding the impact of PFIs, is a healthy signal of future growth with Government Solutions posting 1.3x, Technology Solutions posting 1.3x and Energy Solutions posting 0.5x.
Liquidity and Capital Structure
On September 30, 2020, the company completed a private offering of $250 million of 4.750% Senior Notes due 2028 (the “Notes”). The Notes are senior unsecured obligations of KBR and are fully and unconditionally guaranteed by each of the company’s existing and future domestic subsidiaries. Net proceeds of approximately $245m after fees and offering expenses were used to finance a portion of the purchase price for the Centauri acquisition that closed on October 1, 2020. Interest is payable semi-annually in arrears on March 30 and September 30 of each year, beginning on March 31, 2021, and the principal is due on September 30, 2028.
28 Oct 20. Airbus sets quarterly cash goal, takes heavy restructuring charge. Airbus AIR.PA said on Thursday it expected to reach cash breakeven in the fourth quarter, giving investors the first glimpse of future performance since the start of the coronavirus crisis after halting the bleeding of cash in the third quarter.
FILE PHOTO: A logo of Airbus is seen at the entrance of its factory in Blagnac near Toulouse, France, July 2, 2020. REUTERS/Benoit Tessier/File Photo
The European planemaker, which is slashing jobs to cope with collapsing air travel demand, also took a 1.2bn-euro (1.1bn pounds) restructuring charge that drove it to a loss despite better-than-expected underlying operating profit.
Underlying or adjusted operating profit of 820m euros marked a 49% drop from the same period last year, while revenues fell 27% to 11.2bn euros.
Analysts were expecting quarterly adjusted operating profit of 708m euros on revenues of 11.439bn, according to a company-compiled consensus.
Airbus said it had contained cash outflows in the third quarter as it narrowed a gap between production and deliveries to airlines, which had slumped at the outset of the crisis.
However, the announcement came as France and Germany, where Airbus has its main factories, announced new restrictions to try to contain a resurgence of the COVID-19 epidemic.
Airbus has been saddled with a backlog of some 145 aircraft that airlines have postponed absorbing into their fleets as they struggle to survive the crisis. It said that this overhang of undelivered jets had shrunk to 135 planes by end-September.
The company has shored up deliveries partly by striking storage agreements with airlines unable to put jets directly into service. But some industry sources said a new lockdown in France raised new questions about its ability to deliver jets.
Airbus has said its planning reflects talks with customers.
The company said its new restructuring charge may have to be reassessed depending on ongoing talks with unions over 15,000 job cuts, though it said these had “advanced well”.
Chief Executive Guillaume Faury warned staff last month that cuts could include the first compulsory redundancies at Airbus as air travel failed to rebound as quickly as hoped.
Airbus also shed more light on a recent effort to smooth a long-running trade row with Boeing and the United States over aircraft subsidies by resetting the terms of French and Spanish government loans, saying it had cost 236m euros.
The loans have been ruled illegal by the World Trade Organization, leading to U.S. tariffs on European goods. The European Union this week formally won the right to put its own tariffs on U.S. goods over aid for Boeing that the WTO found illegal. Both sides claim to have withdrawn illegal support. (Source: Reuters)
29 Oct 20. Airbus reports Nine-Month (9m) 2020 results.
- Global air travel recovery slower than anticipated
- Cash containment and business adaptation on track
- 9m revenues € 30.2bn; 9m EBIT Adjusted € -0.1bn
- 9m EBIT (reported) € -2.2bn; 9m loss per share (reported) € -3.43
- Restructuring provision of € -1.2bn recognised in EBIT (reported)
- 9m free cash flow before M&A and customer financing € -11.8 bn
- Strong liquidity underpins business resilience and flexibility
- Q3 performance: convergence of production and deliveries, free cash flow before M&A and customer financing € +0.6bn
- Guidance issued on FCF before M&A and customer financing for fourth quarter 2020
Airbus SE (stock exchange symbol: AIR) reported consolidated financial results for the nine months ended 30 September 2020.
“After nine months of 2020 we now see the progress made on adapting our business to the new COVID-19 market environment. Despite the slower air travel recovery than anticipated, we converged commercial aircraft production and deliveries in the third quarter and we stopped cash consumption in line with our ambition,” said Airbus Chief Executive Officer Guillaume Faury. “Furthermore, the restructuring provision booked shows our discussions with social partners and stakeholders have advanced well. Our ability to stabilise the cash flow in the quarter gives us confidence to issue a free cash flow guidance for the fourth quarter.”
Net commercial aircraft orders totalled 300 (9m 2019: 127 aircraft) with the order backlog comprising 7,441 commercial aircraft as of 30 September 2020. Airbus Helicopters booked 143 net orders (9m 2019: 173 units), including 8 H160s and 1 H215 during the third quarter. Airbus Defence and Space’s order intake increased to € 8.2 bn, with the third quarter including an additional A330 MRTT as well as contract wins in telecommunications satellites.
Consolidated revenues decreased to € 30.2bn (9m 2019: € 46.2bn), driven by the difficult market environment impacting the commercial aircraft business with around 40% fewer deliveries year-on-year. A total of 341 commercial aircraft were delivered (9m 2019: 571 aircraft), comprising 18 A220s, 282 A320 Family, 9 A330s and 32 A350s. During the third quarter of 2020, a total of 145 commercial aircraft were delivered including 57 deliveries in September. Airbus Helicopters reported broadly stable revenues, reflecting lower deliveries of 169 units (9m 2019: 209 units) partially compensated by higher services. Revenues at Airbus Defence and Space mainly reflected lower volumes in Space Systems and for the A400M as well as the impact of COVID-19 on business phasing. A total of 5 A400M military airlifters were delivered over the nine month period with Luxembourg becoming a new operator.
Consolidated EBIT Adjusted – an alternative performance measure and key indicator capturing the underlying business margin by excluding material charges or profits caused by movements in provisions related to programmes, restructuring or foreign exchange impacts as well as capital gains/losses from the disposal and acquisition of businesses – totalled € -125m (9m 2019: € 4,133m).
Airbus’ EBIT Adjusted of € -641m (9m 2019: € 3,593m(1)) mainly reflected the reduced commercial aircraft deliveries and lower cost efficiency. It also included € -1.0 bn of COVID-19 related charges. The necessary steps have been taken to adapt the cost structure to the new levels of production and the benefits are materialising as the plan is executed. At the end of September, the number of commercial aircraft that could not be delivered due to COVID-19 had reduced to around 135.
Airbus Helicopters’ EBIT Adjusted increased to € 238m (9m 2019: € 205m), reflecting a favourable mix, higher services, a positive contribution from programme execution as well as lower Research & Development (R&D) expenses. During Q3, the first five-bladed H145 helicopter was delivered following certification by the European Union Aviation Safety Agency in Q2.
EBIT Adjusted at Airbus Defence and Space decreased to € 266m (9m 2019: € 355m), mainly reflecting the lower volume in Space Systems, especially in the launcher business due to the impact of COVID-19, partly offset by cost reduction measures. The Division’s restructuring plan updated in H1 2020 is underway and negotiations with the social partners are progressing. The related provision has been recorded in Q3 as part of the EBIT Adjustments.
Consolidated self-financed R&D expenses totalled € 2,032m (9m 2019: € 2,150m).
Consolidated EBIT (reported) was € -2,185m (9m 2019: € 3,431m), including Adjustments totalling a net € -2,060m. These Adjustments comprised:
- € -1,200m booked in Q3 related to the Company-wide restructuring plan, of which € -981m were for Airbus and € -219m for Airbus Defence and Space. The amount takes into account government support measures. It reflects the latest status of the negotiations with social partners, and therefore may be reassessed;
- € -358m related to the A380 programme cost, of which € -26m were in Q3;
- € -374m related to the dollar pre-delivery payment mismatch and balance sheet valuation, of which € -209 m were in Q3;
- € -128m of other costs including compliance, of which € -11m were in Q3.
The consolidated reported loss per share of € -3.43 (9m 2019 earnings per share: € 2.81) includes the financial result of € -712m (9m 2019: € -233m). The financial result mainly reflects a net € -291m related to Dassault Aviation financial instruments, as well as a Repayable Launch Investment (RLI) re-measurement of € -236 m, mainly from amending the French and Spanish contracts to what the World Trade Organisation considers the appropriate interest rate and risk assessment benchmarks. It also includes the impairment of a loan to OneWeb, recognised in Q1. The consolidated net loss(2) was € -2,686m (9m 2019 net income: € 2,186m).
Consolidated free cash flow before M&A and customer financing amounted to € -11,798m (9m 2019: € -4,937m) of which € +0.6 bn were in the third quarter. The Q3 2020 free cash flow performance reflects the higher level of deliveries compared to the prior quarter, cash containment efforts and the strong focus on working capital management.
Capital expenditure in the nine month period was around € 1.2bn, down by around € 0.3bn year-on-year, driven by a reduction in spending in the third quarter in line with the Company’s cash containment efforts. Consolidated free cash flow was € -12,276m (9m 2019: € -5,127m). The consolidated net debt position was € -242m on 30 September 2020 (year-end 2019 net cash position: € 12.5bn) with a gross cash position of € 18.1bn (year-end 2019: € 22.7bn).
The Company’s Full-Year 2020 guidance was withdrawn in March. Given the continued impact of COVID-19 on the business and the associated risks, no new guidance is issued on commercial aircraft deliveries or EBIT.
As the basis for its Q4 2020 guidance for free cash flow before M&A and customer financing, the Company assumes no further disruptions to the world economy, air traffic, Airbus’ internal operations, and to its ability to deliver products and services.
On that basis, the Company targets at least breakeven free cash flow before M&A and customer financing in the fourth quarter of 2020.
Key post-closing events
On 21 October 2020, the Company signed a new € 6bn Revolving Syndicated Credit Facility partially terming out the € 15bn credit facility by € 3bn and in order to refinance its existing € 3bn Revolving Syndicated Facility.
29 Oct 20. Semiconductor group Advanced Micro Devices (US:AMD) has agreed to buy Xilinx (US:XLNX) in an all-stock deal worth $35bn. It hopes the acquisition will create the industry’s leading high-performance computing company that will be immediately accretive for AMD’s margins, EPS and free-cash-flow generation. Together, the companies boast a team of 13,000 engineers and more than $2.7bn in annual research and development investment. The news comes hot on the heels of Nvidia’s agreement to buy Arm from SoftBank last month, for $40bn. (Source: Investors Chronicle)
29 Oct 20. Gives You Wings. Airbus Group NV (AIR FP) BUY, €61.77 PT: €80.00. It’s not about 3Q20 EBIT being 16% above consensus or FCF being an inflow of €642m versus the consensus outflow of €65m. It is all about the relative stability in 3Q20, and the base 3Q20 provides, a base that allows Airbus to guide for at least FCF neutral in 4Q20. We are sitting more comfortably.
3Q20 results in brief. Aircraft deliveries fell from 182 to 145, of which 125 were A320 Family (3Q19 = 128). Airbus Commercial revenue fell from €11,529m to €7,738m (Co-sourced cons €7,996m) and EBIT Adjusted fell from €1,400m to €666m (Cons €541m). Helicopters EBIT Adjusted rose from €80m to €86m (Cons €80m). Defence and Space EBIT fell from €122m to €80m (Cons €66m). FCF was an inflow of €642m (Cons outflow €65m). The reported Group EBIT loss of €626m is after a £1.2bn restructuring charge. Airbus targets FCF breakeven in 4Q20. All in all, an unremarkable quarter which is, of course, the remarkable thing.
Understanding EBIT. 3Q20 Airbus Commercial EBIT fell €734m YoY. A small part of that is due to 3 fewer A320 Family deliveries, but most must result from 29 fewer widebody deliveries, the A220, the service and supply chain operations and, probably, unrecovered costs. It would be surprising if furlough schemes and short time working had eliminated the latter. In 2Q20, we estimated unrecovered costs at around €500m, but there were many moving parts. We anticipate such costs can be largely eliminated over the next 12 months, but not wholly if Airbus retains the capacity to raise production in the future. The key point, however, is that 3Q20 may provide a sound base; the outcome when A320 Family deliveries largely match production. As widebody deliveries may remain low for some years, it is important to have a feel for what will happen when A320 production rises. We feel that we now do.
Understanding FCF. After rising €6bn in 1H20, the 3Q20 balance sheet inventory change was a reduction of €869m. FX movements will have flattered that a little. The net change in trade receivables/payables was an outflow of €1,177m. Contract liabilities (which include pre-delivery payments) rose by €406m. In total, working capital was probably very slightly helped, making 3Q20 FCF of €642m look good quality, in our view. No doubt many other variables were at work (A400M, perhaps), but we are again looking at relative stability.
Gives you wings. Last March, we believed 3Q20 would be a ghastly quarter. Instead, aircraft production rates were adjusted in early April and 2Q20 bore the brunt of lower deliveries. We believe 3Q20 establishes a base for both EBIT and FCF, a big step forward for any equity story, in our view. End 3Q20 net debt was €242m and liquidity of €12.3bn was available, making financial risk low, in our view. Sure, we are positively surprised that airlines are taking delivery of so many A320 Family aircraft. That may reflect contractual terms, the attractiveness of the aircraft, long-term fleet planning to meet emissions targets, attractive financing, even the woes of the 737 MAX. We suspect it’s a combination of all. Now we wait for a more positive backdrop to give the equity story wings, but we can do so from a quite comfortable position, in our view. (Source: Jefferies)
28 Oct 20. Curtiss-Wright Corporation (NYSE: CW) reports financial results for the third quarter ended September 30, 2020.
Third Quarter 2020 Highlights:
- Reported diluted earnings per share (EPS) of $1.55, with Adjusted diluted EPS of $1.85;
- Net sales of $572m, down 7%, with defense market sales up 11%;
- Reported operating income of $85m, with Reported operating margin of 14.8%;
- Adjusted operating income of $100m, down 7%;
- Adjusted operating margin of 17.4%, flat compared to the prior year, as benefits of our cost containment and restructuring initiatives partially offset reduced commercial markets sales;
- Reported free cash flow (FCF) of $49m, with Adjusted FCF of $55 m; Year-to-date Adjusted FCF of $138 m, up 12%; and
- Share repurchases of approximately $13m.
“We generated solid third quarter Adjusted diluted EPS of $1.85 led by stronger than expected sales growth in our defense markets of 11%,” said David C. Adams, Chairman and CEO of Curtiss-Wright Corporation. “In addition, all three segments demonstrated sequential quarterly improvement in sales, operating income and operating margin, and also benefitted from the savings generated by our ongoing cost containment and restructuring initiatives. We remain on track to achieve our full-year 2020 guidance.”
Updated Full-Year 2020 Adjusted Guidance (compared to Full-Year 2019 Adjusted Actuals):
- Narrowed overall sales guidance by raising bottom end of range to down 4% to 5% (previously down 4% to 6%); Increased defense markets sales growth range to up 11% to 13% (previously up 8% to 10%);
- Increased Adjusted operating margin by 10 basis points to new range of 16.1% to 16.3% (previously 16.0% to 16.2%);
- Narrowed Adjusted diluted EPS guidance to new range of $6.70 to $6.85 (previously $6.60 to $6.85);
- Maintained Adjusted FCF guidance range of $350 to $380m, with Adjusted FCF conversion of approximately 130%; and
- Updated guidance does not include the recently announced acquisition of Pacific Star Communications, Inc. (PacStar), a leading provider of advanced tactical communications solutions for battlefield network management, which is anticipated to close in the fourth quarter.
Mr. Adams continued, “Looking ahead to the remainder of 2020, we expect continued overall sales growth in our defense markets, which remain strong, and savings generated by our restructuring actions to drive sequential improvement in operating margin, diluted EPS and free cash flow.”
“We continue to leverage our strong and healthy balance sheet to implement our balanced capital allocation strategy. Last month, we announced our decision to acquire PacStar and today we are pleased to announce the authorization of an additional $200 m in share repurchases. In addition, as part of our previously announced 2020 restructuring actions, we have elected to discontinue our build-to-print actuation contract supporting the Boeing 737 MAX program at the conclusion of this year. Phasing out this historically low-margin and commodity-type business will lessen the Company’s overall exposure to the commercial aerospace market. Collectively, these actions are expected to aid our efforts to drive long-term profitable growth and deliver significant value for our shareholders.”
Company Announces New $200m Share Repurchase Authorization:
- Curtiss-Wright’s Board of Directors has authorized an additional $200m for future share repurchases, increasing total available authorization to $250m, which is immediately available for opportunistic share repurchases;
- Of this authorization, the Company intends to repurchase a minimum of $50 m in opportunistic share repurchases in the fourth quarter of 2020;
- The Company remains on track to complete its existing $50m 10b5-1 share repurchase program authorized for 2020 by the end of the year, and had previously completed a $100m opportunistic share repurchase program executed in March 2020; and
- Beginning in January 2021, the Company expects to repurchase $50m additional shares via a 10b5-1 program throughout 2021, which is expected to more than offset potential dilution from compensation plans.
Third Quarter 2020 Operating Results
- Sales of $572m, down $43m, or 7%;
- Sales to the defense markets increased 11%, 6% of which was organic, led by strong growth in aerospace and naval defense, while sales to the commercial markets decreased 22%, due to reduced demand in the commercial aerospace, general industrial and power generation markets. Please refer to the accompanying tables for an overall breakdown of sales by end market;
- Adjusted operating income was $100m, down 7%, reflecting unfavorable overhead absorption on lower revenues in the Commercial/Industrial segment, partially offset by increased profitability in the Power segment;
- Adjusted operating margin was flat at 17.4%, reflecting the benefits of our company-wide restructuring and cost containment actions; and
- Non-segment expenses of $8m increased by $1m, or 10%, compared to the prior year, primarily due to higher corporate costs.
Net Earnings and Diluted EPS
- Reported net earnings of $65 m, down 22% from the prior year, reflecting lower segment operating income and higher interest expense;
- Reported diluted EPS of $1.55, down 19% from the prior year, reflecting lower net earnings, partially offset by a lower share count;
- Adjusted net earnings of $77m, down 8%;
- Adjusted diluted EPS of $1.85, down 5%; and
- Effective tax rate of 20.2% decreased slightly compared to the prior year quarter.
Free Cash Flow
- Reported free cash flow was $49m, a decrease of $53m compared to the prior year, principally driven by lower cash earnings and lower collections, partially offset by a reduction in capital expenditures;
- Capital expenditures decreased $9m to $7m compared to the prior year, primarily due to lower capital investments within the Power segment; and
- Adjusted free cash flow was $55m in the third quarter.
New Orders and Backlog
- New orders of $559 m decreased 14% compared with the prior year period, as strong growth in embedded computing and valves products serving the defense markets was more than offset by reduced demand across the commercial markets; Order activity within our commercial and industrial markets continued to demonstrate solid monthly improvement compared with the lows experienced in May; and
- Backlog of $2.2bn increased 1% from December 31, 2019.
Share Repurchase and Dividends
- During the third quarter, the Company repurchased 133,673 shares of its common stock for approximately $13m;
- Year-to-date, the Company repurchased 1.37m shares for approximately $138 m, which included a $100m opportunistic share repurchase program executed in March; and
- The Company also declared a quarterly dividend of $0.17 a share, unchanged from the previous quarter.
Third Quarter 2020 Segment Performance
- Sales of $223m, down $56m, or 20%;
- Higher aerospace defense revenues reflect increased sales of actuation and sensors equipment on various fighter jet programs;
- Lower commercial aerospace market revenues reflect reduced OEM sales of actuation and sensors equipment, as well as surface treatment services;
- General industrial market revenue declines reflect reduced year-over-year sales for industrial vehicle, valve and controls products, as well as surface treatment services;
- Reported operating income was $25m, with Reported operating margin of 11.2%; and
- Adjusted operating income was $33m, while Adjusted operating margin decreased 100 basis points to 14.6%, principally reflecting unfavorable absorption on lower commercial sales partially offset by the benefits of our cost containment and restructuring initiatives.
- Sales of $180m, up $20m, or 12%;
- Higher aerospace defense market revenues were principally driven by increased sales of embedded computing equipment on various programs, most notably on Unmanned Aerial Vehicle (UAV) platforms;
- Strong naval defense market revenue growth reflected timing of production of valves on submarine and aircraft carrier programs, as well as the contribution from the 901D acquisition;
- Reduced ground defense market revenues reflect lower sales on international tank platforms;
- Reported operating income was $42m, with Reported operating margin of 23.0%; and
- Adjusted operating income was $45m, up 11% from the prior year, while Adjusted operating margin decreased 40 basis points to 25.0%, reflecting unfavorable mix on strong sales of our defense electronics products, mainly offset by the contribution from acquisitions and the benefits of our cost containment actions.
- Sales of $169m, down $7m, or 4%;
- Naval defense market revenues increased slightly, as higher Columbia class submarine production revenues were mainly offset by lower service center sales;
- Reduced power generation market sales principally reflect lower domestic and international aftermarket revenues, partially offset by increased revenues on the CAP1000 program;
- Reported operating income was $26m, with Reported operating margin of 15.4%; and
- Adjusted operating income was $30m, flat compared to the prior year, while Adjusted operating margin increased 70 basis points to 17.7%, principally driven by the benefits of our cost containment and restructuring initiatives.
26 Oct 20. Francisco Partners to Acquire Forcepoint from Raytheon Technologies. Under new ownership Forcepoint will accelerate product development and growth. Forcepoint, a leading provider of cybersecurity solutions that protects the critical data and networks of thousands of customers throughout the world, and Francisco Partners, a leading global investment firm that specializes in partnering with technology and technology-enabled businesses, announced today that Francisco Partners has signed a definitive agreement to acquire Forcepoint from Raytheon Technologies.
“We have followed Forcepoint for years and have a deep appreciation for its outstanding portfolio of innovative security products,” said Brian Decker, Partner at Francisco Partners. “Security is an increasingly important strategic investment area for enterprises, creating significant opportunities for Forcepoint to continue to build upon its track record of success.”
“Executing divisional carve-outs has been a core focus of Francisco Partners since we founded the firm in 1999,” added Andrew Kowal, Partner at Francisco Partners. “We look forward to working with the Forcepoint management team to help the company realize its full potential as an independent company while delivering enhanced value to the company’s customers, partners, and the end users its products protect.”
Forcepoint offers a leading portfolio of cybersecurity solutions, helping enterprises worldwide monitor and protect networks, endpoints, data, and users. The company’s behavior-based solutions adapt to risk in real-time and are delivered through a cloud-native security platform that protects network users and cloud access, prevents confidential data from leaving the corporate network, and eliminates breaches caused by insiders. Thousands of customers in more than 150 countries trust Forcepoint to safeguard their organizations while driving digital transformation and growth and providing secure access that enables employees to create value.
“We are proud to have built an industry-leading portfolio of security products that protect our customers’ infrastructure, people, and data,” said Matt Moynahan, CEO of Forcepoint. “This transaction represents an exciting opportunity for Forcepoint to continue to innovate and drive growth with Francisco Partners. We believe that this partnership will help us to continue to invest in our products and organization while delivering increased value to our customers.”
Evan Daar, Principal at Francisco Partners, added, “Forcepoint has established a leadership position as a provider of cybersecurity solutions to customers around the world. We look forward to partnering with the Forcepoint team to further invest in the company’s cloud security portfolio.”
Debt financing for this transaction was provided by Credit Suisse. Paul Hastings LLP and Kirkland & Ellis acted as legal advisors to Francisco Partners. Barclays acted as exclusive financial advisor and Davis Polk & Wardwell LLP acted as legal advisor to Raytheon Technologies. The transaction is subject to customary regulatory review. (Source: BUSINESS WIRE)
26 Oct 20. Space situational awareness company to be bought for $700m. Ansys, an engineering simulation company, plans to purchase a Pennsylvania-based satellite tracking and modeling firm for $700m, according to an Oct. 26 announcement.
Ansys is preparing to acquire Analytical Graphics Inc., which performs software development for simulation, modeling, testing and analysis tools for a number a uses, though perhaps the 30-year-old company is most well known for modeling and tracking satellites on orbit to provide key data on orbital mechanics that helps operators avoid collisions and safely operate their equipment.
That level of space situational awareness is likely to become even more valuable for satellite operators as space becomes more crowded. Experts predict as many as 10,000 new satellites to be launched over the next five years, driven by the proliferated constellations being developed by private businesses and the U.S. Defense Department. At the beginning of 2020, there were about 2,000 active satellites on orbit.
Recent near misses have further highlighted concerns over space debris. In January, two defunct satellites nearly collided in low Earth orbit. While there wasn’t much concern about damage to the two satellites, which had long ceased operations, a collision between the two would have sent debris scattering throughout space, posing a hazard to active satellites.
The Inter-Agency Space Debris Coordination Committee — a group of space agencies from around the world — say such incidents are likely to occur every five to nine years. But as space becomes more crowded, experts worry the likelihood of a collision will increase.
Ansys plans to add AGI’s space situational awareness tools to its simulation portfolio, allowing customers to simulate their entire mission — from the chip level all the way to a satellite’s orbital mechanics and connection to ground stations.
“Ansys’ acquisition of AGI will help drive our strategy of making simulation pervasive from the smallest component now through a customer’s entire mission,” Ansys President and CEO Ajei Gopal said in a statement. “It will also expand the use of simulation in the key aerospace sector, where the stakes can be at their highest levels. We are excited to welcome the expert AGI team — and to expand the reach of their world-class technology to industries outside of aerospace, including for autonomy and 5G applications.”
AGI was already an Ansys partner, but the latter hopes the acquisition will drive new aerospace and defense customers to its mission-based simulation services.
“In the three decades since our founding, we have continuously invested in our technology to create and advance digital mission engineering,” AGI co-founder and CEO Paul Graziani said in a statement. “We are thrilled to become part of Ansys so we can dramatically extend the reach of our world-class products and help more customers accomplish their critical missions.”
The acquisition is expected to close before the end of 2020, with Ansys paying 67 percent of the $700m price tag in cash and issuing stock for the remaining amount. (Source: C4ISR & Networks)
26 Oct 20. Rolls-Royce seeks $2.6bn in make-or-break share issue. Aero-engine maker Rolls-Royce will ask shareholders on Tuesday for £2bn ($2.6bn) in a make-or-break attempt to survive the COVID-19 pandemic, which has stopped planes flying and hammered its finances.
FILE PHOTO: A man looks at Rolls Royce’s Trent Engine displayed at the Singapore Airshow in Singapore February 11, 2020. REUTERS/Edgar Su/File Photo
At stake is the future of a company which has been at the heart of manufacturing in Britain for more than 100 years, making engines that powered World War Two bombers and still drive the country’s fighter jets and nuclear submarines.
Investors are expected to back the rights issue, supporting CEO Warren East’s plan to cut 9,000 jobs and close factories to adjust to a lower level of demand from airline customers that fly with Rolls engines on Boeing 787s and Airbus 350s.
Shareholder advisory groups Institutional Shareholder Services and Glass Lewis have both urged clients to back the fundraising.
“We find the terms of the proposed rights issue to be reasonable,” Glass Lewis said in a note, while ISS said the rationale was “compelling”.
Investors can buy 10 new shares for every three they own at 32 pence each, a 41% discount to the theoretical ex-rights price.
The company, which made a £5.4bn loss in the first half of 2020, faces a cash crunch at the end of next year, when £3.2bn of debt needs to be repaid.
In a sign of Rolls’s strategic importance, the UK government has guaranteed a £1bn loan on top of the £2bn it backed in July through its UK Export Finance arm.
Rolls accounts for 2% of all UK goods exported and is one of the country’s biggest spenders on research and development. It also buys from 2,300 smaller UK suppliers, and before the pandemic supported as many as 135,000 UK jobs.
But COVID-19 has shattered the company’s finances because airlines only pay it when their planes fly, forcing it to seek a £5bn debt and equity package to survive many more months of expected turmoil.
Rolls’s market value has slumped from over £20bn in 2018 to £4.7bn, putting it broadly on a par with online clothing retailer ASOS.
Analysts are positive on Rolls’s future if it secures the 50% plus one of votes cast at Tuesday’s virtual meeting.
“They’ve given themselves enough time and space to make sure that they get through to the other side,” said Agency Partner analyst Nick Cunningham.
Further debt options will also open up if shareholders back the fundraising, including £2bn from bonds, after strong investor demand enabled it to double the amount it had been aiming for.
While the rights issue will be highly dilutive for shareholders, investor advisory groups say it is preferable to a stake sale to a sovereign wealth fund, which would not have given them the option to participate.
But ongoing travel restrictions mean the outlook is bleak. There were just three orders for the wide-body jets that Rolls supplies in the third quarter, according to UK industry body ADS. (Source: Reuters)
26 Oct 20. AE Industrial Partners Acquires PCI, a Leading Provider of Cybersecurity, CNO, Cloud, Data Analytics and Enterprise IT Solutions for the Intelligence and Defense Communities.
AE Industrial Partners, LP (“AEI”), a private equity firm specializing in Aerospace, Defense & Government Services, Power Generation, and Specialty Industrial markets, announced today that it has acquired PCI (or “the Company”), a leading provider of cybersecurity, computer network operations (“CNO”), cloud, systems engineering, enterprise IT, and data analytics to the intelligence and defense communities. Terms of the transaction were not disclosed.
The acquisition of PCI represents AEI’s ninth platform investment in AE Industrial Partners Fund II, LP, which closed in 2018 with $1.36 billion in equity commitments, and the thirteenth transaction closed by AEI in 2020. PCI is a unique platform investment for AEI as the firm continues its momentum and recent success in the Defense & Government Services market, and will provide PCI with additional reach into the defense, intelligence, and national security communities.
PCI is a technology-focused company that provides cybersecurity and CNO, cloud engineering and IT infrastructure, data analytics, and system engineering solutions and services. PCI is a trusted advisor to the U.S. Intelligence Community, Department of Defense, and Federal Government, developing leading-edge mission solutions using emerging technologies and proven practices to solve the most complex cybersecurity, cloud, and enterprise IT challenges of its customers. Founded in 2008 by Sean Battle, Don Whitfield, Josh Kinley, and Vance Mitzner, PCI is based in Columbia, Maryland, with additional operations throughout the United States and globally. The Company has been named a best place to work by the Baltimore Sun, selected for the 2020 Inc. 5000 list of fastest-growing private companies in America, and has also been recognized for its commitment to community involvement and engagement.
“PCI is a trusted provider of critical technology services in support of some of the most enduring national security missions across the federal government,” said Jeffrey Hart, a Principal at AEI. “Cyber threats faced by the defense and intelligence communities are at an all-time high, and the government can’t afford to lag our adversaries in critical technology domains such as cyber and computer network operations, where PCI excels. We believe that PCI, with its full spectrum of solutions and premier relationships, is well-positioned and aligned with the national security community’s most strategic priorities. We look forward to working closely with the world-class team at PCI.”
“With the backing of AEI, we will have the resources to invest in the technology and talent required to meet the growing needs of our customers,” said Sean Battle, CEO of PCI. “AEI knows our sector well, and we are confident that PCI will reach its next level of growth with their guidance, relationships, and partnership.”
“We are very excited to partner with Sean and the rest of the PCI team,” said Kirk Konert, Partner at AEI. “They have built a great platform in their core intelligence and defense end markets and have a depth of experience supporting customers on missions critical to national security. We look forward to working with PCI and accelerating the growth of the business.”
Kirkland & Ellis LLP served as legal advisor, and Ernst & Young LLP served as financial advisor to AEI. Miles & Stockbridge P.C. served as legal advisor, and Aronson Capital Partners served as financial advisor to PCI.
Founded in 2008, PCI is a technology-focused company that provides cybersecurity and CNO, cloud engineering and IT infrastructure, data analytics, and system engineering solutions and services to the federal government and intelligence community. Based in Columbia, Maryland, and with a corporate office and training facility in Lexington, Massachusetts, PCI operates in 14 states and internationally. For more information, please visit https://gopci.com/
About AE Industrial Partners
AE Industrial Partners is a private equity firm specializing in Aerospace, Defense & Government Services, Power Generation, and Specialty Industrial markets. AE Industrial Partners invests in market-leading companies that can benefit from our deep industry knowledge, operating experience, and relationships throughout our target markets. Learn more at www.aeroequity.com. (Source: PR Newswire)
21 Oct 20. D-Orbit Secures 15m Euros Of Financing. D-Orbit secured 15m euros financing from the European Investment Bank (EIB) in September, marking the first time that the EIB has funded a space firm — the funds will advance the expansion of the company, whose goal is to redefine the standards of the orbital transportation industry.
In March, the company had already secured a funding round of more than $10m led by the Italian Neva F.I.R.S.T., Intesa Sanpaolo’s Corporate Venture Capital investment vehicle managed by Neva SGR, and some new and existing investors. Among the new investors are 808 Ventures, an Australian tech investor, the US-based View Different, Savim and two Italian private investment vehicles Geostazionaria and ClubDealOnline (contributing about $3m).
Existing investors, such as Seraphim Capital, Noosphere Ventures, Elysia Capital, CDP Venture Capital Sgr., Nova Capital and TT Venture, also reaffirmed their commitment and trust in the company by incrementing their initial investments.
D-Orbit recently launched their ION Satellite Carrier, a satellite platform developed and operated in house that is able to host several satellites and deploy them in their precise operational slot in one or more orbits and the firm is completing the ground testing campaign of a new satellite carrier destined for a second, fully booked ION mission.
“We are truly grateful to all our shareholders, those who have just joined our Company and those who have believed in us from the very beginning, like Indaco SGR, Comoventures, and Il Club degli Investitori,” said Luca Rossettini, Founder and CEO of D-Orbit. “Their trust and support have enabled us to carry on with our roadmap through these extraordinary times reaching exceptional objectives.” (Source: Satnews)
20 Oct 20. mu Space Aiming To Fundraise To More Than $100m Valuation. mu Space and Advanced Technology, Satellite and Space Technologies venture — led by an aerospace engineer James Yenbamroong (Founder and CEO of the company) — are in talks to raise as much as $25m in series B funding at a pre-money valuation of $75m (2.3bn Baht.)
According to a document reviewed by people familiar with the company’s fundraising activities, the new funding will raise the value of ‘mu Space’ to more than $100m.
The new funding is expected to conclude in the fourth quarter. The new $25m series B funding will be spent on the development of a High Throughput Satellite (HTS), whose majority of its components will be developed by ‘mu Space’ engineers. The satellite will be deployed to provide commercial broadband internet services in Thailand and the Asia Pacific Region.
The new funding will also help the company build a medium-sized ‘future’ factory to develop and manufacture space technology, which includes satellites, automation systems, and robots. These innovations will be placed into service in the future. It is expected that the projects will boost investment and employment by generating thousands of new high-paying job opportunities that meet the future demand for the rapidly-growing space technology industry.
Leveraging on existing strong ground infrastructure assets, ‘mu Space’ has partnered with “TOT,” the Thai state-owned telecommunications infrastructure company, to establish a gateway system and provide ground services in key areas of various provinces in Thailand. In addition, ‘mu Space’ plans to demonstrate the new 5G technology in its factory in the Eastern Economic Corridor (EEC) area, where defence and aerospace industries are getting the highest priority in terms of government incentives and assistance, creating high-paying jobs for tech companies in the Eastern region.
As a future technology company, upcoming technologies from mu Space particularly a data center and spaceship concepts will support the rapid development of business sectors that have exceptionally high growth prospects such as Telecommunications, Banks, Securities, including the Industry of Automotive and Aerospace manufacturers.
The SVP of Kasikorn Securities said at a press conference of the MOU signing ceremony between TOT and mu Space that the satellite market — particularly, internet broadband services and the local mobile backhaul market — will likely continue to grow up to $1.3bn per year in Thailand. He added that ‘mu Space’ aims to be a new leading technology player in the satellite industry and the pioneer in transforming the global space industry. According to Morgan Stanley, the value of the space economy will increase to $1.1trn by 2040 globally.
‘mu Space’ previous investors include Mr. Prasop Jirawatwong, the owner of Nice Group — a major sports apparel manufacturer for Nike and Adidas — B. Grimm Power infrastructure conglomerate, Majuven Fund, LP Venture Capital, and Private Equity. Shared investors include high net worth individual trusts, family, and friends. Several investors who invested with the company before have confirmed to contribute in this fundraising round, along with new investors.
‘mu Space,’ founded in 2017, develops satellite and space technologies. In 2018, the company made history for sending the first payload into space from Asia to be onboard with New Shepard, a Blue Origin‘s rocket. ‘mu Space’ plans to launch its satellite and to lead space technology development in Asia-Pacific.
In addition, the ultimate goal of ‘mu Space’ is to solve resource depletion and overpopulation problems by finding new resources outside the earth. The company is determined to build future infrastructure for human colonies and factories on the Moon. The company is aiming to make space tourism possible in years to come. (Source: Satnews)
26 Oct 20. Elbit Systems Reports Impact on its Third Quarter 2020 Financial Results Due to COVID-19. Elbit Systems Ltd. (NASDAQ: ESLT) (TASE: ESLT) (“Elbit Systems” or “the Company”) announced today that, as a result of the impact of the COVID-19 pandemic, Elbit Systems experienced reduced demand for the products and services it supplies to the commercial aviation markets.
The significant slowdown in commercial air traffic, and the expectation that a commercial air traffic recovery to 2019 levels will likely take a number of years, have reduced the demand for products and services for the commercial aviation markets. Additionally, manufacturers of aircraft for these markets have announced plans to reduce production rates to adapt to the lower demand.
Following a review of the economic impact on the Company’s assets overall, and those assets impacted by the commercial aviation industry in particular, the Company expects to record in the third quarter of 2020 non-cash expenses related to impairment of assets and inventory write-offs, due to COVID-19, in the amount of approximately $60m.
These expenses will be recorded mainly in the “Cost of Revenues” line item in the Consolidated Statement of Income and will be eliminated in the non-GAAP results as a category of expenses that are not part of the Company’s regular on-going business.
These expenses will be included in the financial results for the third quarter of 2020 to be reported by the Company in its press release for the quarter, which is planned to be released in November 2020. (Source: PR Newswire)
TCI International, Inc., is a wholly-owned subsidiary of SPX Corporation. TCI provides turn-key solutions for spectrum management and monitoring, direction finding, geolocation and communications intelligence to civilian, government, military and intelligence agencies as well as antennas for communications and high-power radio broadcasting. TCI is headquartered in Fremont, California, USA. For more information, visit www.tcibr.com.