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06 May 21. Livingstone Strikes Deal for Missile Defense & Rocket Specialist.

Advises Beranek on sale to J&E Precision Tool, an LFM Capital portfolio company.

Livingstone announced the sale of Beranek, LLC (“Beranek” or the “Company”), a precision manufacturer of technical components for the aerospace & defense, and space exploration markets, to J&E Precision Tool (“J&E”), a portfolio company of LFM Capital (“LFM”).  Livingstone was the exclusive financial advisor to Beranek. Terms were not disclosed.

Founded in 1978 and based in Torrance, California, Beranek is a second-generation family business serving blue-chip defense prime contractors and global aerospace customers that require high cost-of-failure parts for complex systems, manufactured to exacting specifications. The Company’s components are utilized in military aerospace, space rocket engines & firing systems, and commercial aircraft. Boasting complex manufacturing certifications, entrenched positions with key customers, and decades of highly technical experience, the Company represents a critical link in the global A&D supply chain.

George Beranek, President of Beranek, commented, “Livingstone provided flawless transaction execution advising our family throughout the sale process. They provided first-class representation and managed the process every step of the way, ultimately connecting us with a high-caliber set of interested parties. We are thrilled to be partnering with J&E to carry on Beranek’s legacy.”

“We congratulate George and his team on the strong business they have built with Beranek,” stated Sean Holly, CEO of J&E. “We welcome the Beranek team to J&E. Together, we will expand our precision machining capabilities, west coast presence, and service capabilities.”

Karl Freimuth, Partner at Livingstone, commented, “The Beranek family built a valuable enterprise specializing in the missile defense, military aircraft, and space exploration markets. The Company was a coveted asset and represents another successful transaction for Livingstone’s global industrial practice. We expect demand for high-quality industrial technology businesses to remain incredibly robust for the balance of 2021.”

“The Beranek transaction highlights Livingstone’s commitment to delivering outstanding outcomes to family- and entrepreneur-owned clients. It was a pleasure working with George and his family, and we congratulate them on their next chapter with an excellent partner in J&E,” stated Patrick Hopkins, Director at Livingstone.

Founded in 1979 and based in Southampton, Massachusetts, J&E is a leading precision manufacturer of components for the aerospace and defense industry. It operates successfully in commercial & defense aviation end markets and other high-precision industries such as microwave equipment and electro-optic. J&E’s products are used on a wide variety of aerospace & defense platforms and include racking components, piston ejection systems, and pneumatic deck assemblies.

Based in Nashville, Tennessee, LFM is a private equity firm led by experienced and successful Fortune 50 global executive managers and private equity professionals who bring decades of management leadership, operating best practices, exceptional professional recruiting networks, and a successful track record in lower middle-market investing. LFM targets lead or control investments in U.S.-based lower middle-market manufacturing and industrial services companies.  Its mission is to partner with portfolio company management to develop and build world-class operations through a combination of manufacturing and operations excellence and targeted growth and expansion strategies.

Beranek is Livingstone’s 166th transaction completed since 2018, and the 64th global industrial transaction completed in the same timeframe following the sales of Lesman to Kele, LT Harnett to A&R, Cummins Allison to Crane, Capital Southwest’s portfolio company, SpotSee, to Harbour Group, Royal Truck Body to Shyft Group, and Artistic Carton to Graphic Packaging.

Guzman Law Group, PC served as legal counsel while Blythe Global Advisors, LLC provided transaction-related accounting services to Beranek.  Bass, Berry & Sims PLC served as legal counsel, and LBMC, PC, provided transaction-related accounting services to J&E.

About Livingstone:

Livingstone is an international mid-market M&A and debt advisory firm with offices in Beijing, Chicago, Düsseldorf, London, Los Angeles, Madrid, and Stockholm. We have deep industry expertise, and extensive global coverage, with dedicated teams across our offices serving the Business & Technology Services, Consumer, Healthcare, and Industrial segments and close an average of 50+ transactions annually.

(Source: PR Newswire)

 

06 May 21. Ball Reports Strong First Quarter 2021 Results.

Highlights

– U.S. GAAP earnings per diluted share of 60 cents vs. 7 cents in 2020

– Comparable earnings per diluted share of 72 cents vs. 61 cents in 2020; an increase of 18%

– Global beverage can volumes up 8%; specialty mix exceeds 49%

– Contracted aerospace backlog of $2.2bn and won-not-booked backlog of $5.3bn

– Successful start-up of Glendale, Arizona, beverage can manufacturing facility; four lines operational by late 2021

– Executed national distribution of Ball Aluminum Cup™ at retail

– Positioned to exceed long-term diluted earnings per share growth goal of 10 to 15%

Ball Corporation (NYSE: BLL) today reported, on a U.S. GAAP basis, first quarter 2021 net earnings attributable to the corporation of $200m (including net after-tax charges of $40m, or 12 cents per diluted share for business consolidation and other non-comparable items), or 60 cents per diluted share, on sales of $3.1bn, compared to $23m net earnings attributable to the corporation, or 7 cents per diluted share (including net after-tax charges of $179m, or 54 cents per diluted share for business consolidation and other non-comparable items), on sales of $2.8bn in 2020. Ball’s first quarter 2021 comparable net earnings were $240m, or 72 cents per diluted share, compared to $202 m, or 61 cents per diluted share in 2020.

Details of comparable segment earnings, business consolidation activities, business segment descriptions and other non-comparable items can be found in the notes to the unaudited condensed consolidated financial statements that accompany this news release. References to volume data represent units shipped.

During the quarter, the company increased comparable earnings per diluted share by 18% on 8% global beverage volume growth and maintained strong aerospace backlog. In addition to focusing on team safety, the company’s EMEA and South American beverage can businesses experienced notably stronger comparable earnings, the new beverage can manufacturing facility in Glendale, Arizona, started production and the Ball Aluminum Cup™ began national rollout distribution at retail late in the quarter. Significant demand growth for sustainable aluminum packaging continues to outstrip global supply and the cadence of capital investments to address contracted customer demand is accelerating.

“Positive momentum continues across our company despite anticipated startup costs and isolated operational impacts in our North American beverage can business due to winter storms and aerospace customer supply-chain disruptions experienced during the quarter. Global projects in North America, South America and EMEA are expected to add at least 25bn units of contracted beverage can capacity by year-end 2023 (off a 2019 base of 100bn units), projects are on track and will contribute meaningfully to 2021 and beyond. Our focus remains on our employees’ safety, training and development, the efficient startups of EVA-enhancing capital projects to serve our customers’ growth, the successful retail launch of the Ball Aluminum Cup™ and delivering value to our stakeholders in 2021 and beyond,” said John A. Hayes, chairman and chief executive officer.

Beverage Packaging, North and Central America

Beverage packaging, North and Central America, comparable segment operating earnings for the first quarter 2021 were $140m on sales of $1.3bn compared to $146m on sales of $1.2bn in 2020.

Comparable segment earnings reflect 6% volume growth, the benefits from new contractual terms and higher specialty mix being more than offset by startup costs associated with three new manufacturing plants and the impact of lost production from winter storms.

Demand for aluminum beverage cans and bottles continues to outstrip supply across North America. The company’s new Glendale, Arizona, facility successfully started up during the first quarter, and the company anticipates the new Pittston, Pennsylvania, facility to start beverage can production by the end of second quarter. The company further anticipates Glendale and Pittston to exit 2021 with four lines operational in each facility. As needed, both facilities are scalable to add incremental capacity throughout 2022 and beyond to serve consumer’s growth for sustainable packaging, new product introductions and to offset cans currently being imported.

The timeline for the company’s recently announced construction of a new aluminum end manufacturing facility in Bowling Green, Kentucky, has been accelerated to align end capacity with even higher can demand. Bowling Green end manufacturing is now scheduled to begin in late 2021. Full-year 2021 startup costs are still anticipated to be in the range of $50 m.

Beverage Packaging, EMEA

Beverage packaging, EMEA, comparable segment operating earnings for first quarter were $100 m on sales of $796m compared to $68m on sales of $669 m in 2020.

First quarter comparable segment earnings reflect 5% segment volume growth, improving specialty mix and strong consumption trends in the U.K., Nordics, Egypt and Russia. Packaging mix shift to sustainable aluminum cans for traditional and non-traditional beverages continues to accelerate, and demand is outstripping supply. Despite protracted country-by-country COVID-19 lockdowns, additional beverage can line investments in the U.K., Czech Republic and Russia are largely on track to support regional contracted demand in 2021 and beyond.

During the quarter, the segment launched the world’s first ASI (Aluminum Stewardship Initiative) certified can with a major customer in Spain. The cans are certified according to ASI’s standards for responsible production, sourcing and stewardship.

Beverage Packaging, South America

Beverage packaging, South America, comparable segment operating earnings for first quarter were $93m on sales of $487m compared to $63m on sales of $405 m in 2020.

Segment volume ended the quarter up 14% and specialty mix also increased to more than 65%. First quarter earnings reflect favorable price/mix and exceptional operating performance despite COVID-19 recurrences across South America. In Brazil, demand remains very strong and continues to outstrip supply as recyclable aluminum beverage packaging is favored over other substrates.

To support contracted volume growth and can-filling investments across South America, multiple can manufacturing investments are anticipated across our existing footprint in 2021 and beyond. The previously announced multi-line facility in Frutal, Brazil, is on schedule to begin production in the second half of 2021.

Aerospace

Aerospace comparable segment operating earnings for the first quarter were $35 m on sales of $424 m compared to $40m on sales of $432m in 2020. Contracted backlog ended the quarter at $2.2bn and contracts won, but not yet booked into contracted backlog was $5.3bn.

Segment results reflect the inefficiencies created from certain customer supply-chain disruptions, timing effects of certain sub-supplier contracts, and costs due to COVID-19 safety and other protocols. The company continues to win defense, climate change and Earth-monitoring contracts to provide mission-critical programs and technologies to U.S. government, defense, intelligence, and reconnaissance and surveillance customers. Contracted and won-not-booked backlog are expected to rise throughout 2021 and segment earnings remain on track to achieve double-digit growth. Hiring to support future growth and multiple projects to expand manufacturing capacity, test capabilities engineering, and support workspace remain on track.

Non-reportable

In addition to undistributed corporate expenses, the results for the company’s global aluminum aerosol business, beverage can manufacturing facilities in India, Saudi Arabia and Myanmar and investments in the company’s new aluminum cup business continue to be reported in other non-reportable.

First quarter results reflect higher year-over-year undistributed corporate expenses and marketing costs associated with the aluminum cup national retail launch. During the quarter, the company’s global aluminum aerosol volumes increased low-single-digits and customers continue to pursue sustainable packaging solutions including the company’s new Infinity aluminum bottle.

Outlook

“Global demand for aluminum packaging continues to grow. In 2021, we are allocating in excess of $1.5bn in capital to support EVA-enhancing projects at returns higher than our 9% after-tax hurdle. As our cash from operations continues to increase and we maintain optimal net debt to comparable EBITDA ratios, we will accelerate return of value to shareholders via dividends and share repurchases,” said Scott C. Morrison, executive vice president and chief financial officer.

“We continue to achieve at a high level due to our team’s ability to adapt and work safely together. Our Drive for 10 vision and enduring culture allow us to successfully navigate short-term challenges and invest in long-term opportunities to enable growth for sustainable aluminum packaging and aerospace technologies. In 2021 and beyond, we look forward to growing our cash from operations and EVA dollars on an even larger capital base while returning capital to our shareholders and exceeding our long-term diluted earnings per share growth goal of at least 10 to 15%,” Hayes said. (Source: PR Newswire)

 

06 May 21. Axon Q1 2021 Revenue Up 33% on Strong Product Demand, International Expansion, Raising Full-Year Outlook

Strong on SaaS: Annual Recurring Revenue up 39% to $242m.

Dear Shareholders,

We are pleased with our robust start to 2021. Revenue growth of 33% in the quarter exceeded our expectations and drove increased profitability, as we executed upon growing demand for TASER devices and software-heavy body camera bundles. Solid Q1 gross margin reflects a combination of strong TASER demand and fixed-cost leverage on higher-than-expected revenue, which also flowed through to the bottom line.

We are seeing healthy demand for new products, with new products bookings up 130% year over year, driven by productivity and real-time operations software solutions, VR training and transcription services. We are also successfully expanding into new markets, with new market bookings up 35% year over year.

Customers — and increasingly, communities, too — see us as a leader and key partner in the global drive to transform public safety. We hear stories daily about customers using our products to save lives and protect communities. Our software usage metrics are hitting new highs, and customers are enthusiastically supporting our mission to protect life and make the bullet obsolete.

As communities call for more public safety transparency, not only to record all interactions with the public but also to make reporting more transparent, we are helping agencies meet the critical needs of their communities. Our software products such as Axon Performance help agencies manage compliance with body-camera usage policies and foster greater transparency. In fact, data shows that Axon Performance is driving body-camera usage. For example, we’ve documented customers who have improved from recording only about half of their interactions with the public, to recording nearly four out of every five interactions, after implementing Axon Performance software.

“We deployed body-worn cameras to promote transparency and legitimacy in our community and we are committed to being accountable to the community we serve. Axon Performance is a key part of making sure the officers’ cameras are on and recording when they should be. The Performance metrics have allowed officers and supervisors to monitor camera activations, and over the last nine months our activation rates have increased from 54% to 78%.” –Kristofer Jenny, Police Sergeant at Napa Police Department, April 2021

Select Q1 2021 highlights

Our teams are executing on our 2021 strategic priorities of growing our core, scaling new products, unlocking new markets and driving efficiency to fuel growth.

Scaling new products:

Axon Fleet 3 beta trial underway, ALPR demand exceeding expectations: In April, we began beta testing our new AI-powered Automatic License Plate Recognition (ALPR) technology at four agencies. We expect to launch Fleet 3 later this year featuring ALPR notifications and Respond for Devices with location updates and livestreaming. Our Fleet 3 backlog of orders has grown to more than 60 agencies and more than 2,500 vehicles, representing $25m in bookings and higher-than-expected demand for our premium Fleet 3 bundle that includes subscriptions to both ALPR and Respond live streaming from the Fleet cameras.

Axon Fleet 3 with Advanced License Plate Reading (ALPR)

Axon Fleet 3’s AI-powered camera system for ALPR makes it disruptively affordable enough for agencies to equip every patrol car. ALPR is a software subscription add-on that helps to reduce officer distraction and is useful for finding missing children and recovering stolen vehicles. Axon Fleet 3 will integrate ALPR capability in the dashboard camera of every patrol vehicle, allowing agencies to deploy more coverage at a fraction of the cost. Fleet 3 will also enable real-time telemetry and video streaming capabilities and will be compatible with 5G to leverage low-latency connectivity for enhanced real-time services and direct video offload to the cloud. We are simultaneously addressing industry shortcomings to improve data security, transparency and privacy as declining costs enable more widespread use of the technology.

Baltimore PD on track to become the largest agency to deploy Axon Records: Axon has conducted comprehensive in-person acceptance testing with users representing a diverse range of agency roles. Customer feedback is positive about the product’s ease of use and the increased efficiency that the agency will gain. Training for officers on how to use the new system is underway and we are preparing for launch in the coming weeks.

Respond for Devices momentum continues to grow: Hundreds of agencies representing more than 60,000 sworn officers are now using Respond for Devices each month, including our newest feature, Priority Evidence Upload. This allows officers to immediately upload critical evidence over LTE right from their camera rather than waiting to get back to the station to dock their camera or separately connect to an app on their PC or phone. Moreover, our beta of the AutoTranscribe Digital Notepad lets Respond for Devices customers automatically upload all of the audio from their recordings over LTE. As a result, transcriptions are available immediately, enabling officers to expedite report writing rather than waiting until the end of their shift.

Unlocking new markets:

Growing international pipeline: Our deal pipeline in international markets is robust, with the largest new deal activity in Q1 2021 coming from Canada, the UK, Hungary, Brazil and New Zealand. We achieved exciting milestones in Italy with the municipal police departments of the cities of Venice and Udine becoming the first agencies to equip officers with TASER devices and Axon software licenses, and the local police in Latisana, Riviera Friulana becoming the first city to adopt Axon Fleet 2 along with our Interview solution. Meanwhile, the government of Ontario, Canada became the first province to deploy Axon Evidence across public safety agencies, highlighting the growing utility of our cloud software platform. Additionally, Axon completed a cyber security review from the Australian government, fulfilling a requirement from the country’s federal and defense customers to provide an added level of security and assurances and enabling broader adoption of Axon’s cloud solutions in Australia.

Driving efficiency:

Investments drive TASER device capacity, gross margin improvements: We are building additional manufacturing capacity to support our TASER device and cartridge manufacturing lines, in response to growing International and Federal demand and an increased install base. Investments so far in 2021 have resulted in an approximately 40% capacity increase in TASER 7 propulsion module and cartridge line production capacity, combined with greater per-person efficiency that will generate $1 m in gross cost annual run rate savings on the TASER 7. Thus far in 2021, TASER segment manufacturing and supply chain improvements are on track to result in more than $4 m in gross costs savings this year. Segment gross margins may continue to fluctuate based on customer and product mix.

Leveraging the Axon platform: An update on strategic partnerships and investments

To build the public safety ecosystem of the future, Axon is aligning with other innovators and technology disrupters. Our recently announced strategic partnership with Skydio, for instance, makes Skydio drones and autonomy software solutions available to agencies through Axon. This relationship paves the way for the integration of Skydio’s offerings with Axon’s product suite, which will drive ground-breaking evidence management, real-time situational awareness and scene reconstruction capabilities for agencies.

Axon’s recent partnerships and investments are reflective of our vision to become synonymous with public safety — and equally important, allow us to leverage and expand our platform in a transformative manner. Our expanding ecosystem relationships are driven by our focus on customers and their growing needs for digital evidence management and real-time operations.

* RapidSOS: In Q1, Axon invested $20 m in RapidSOS and recently completed a strategic partnership that will for the first time unify life-saving data from both Axon and RapidSOS on a single screen – delivering it to 911 telecommunicators and first responders in real-time. This data includes accurate location, medical and other incident-related information from over 350 m connected devices recognized as RapidSOS Ready, such as smart phones, as well as live footage from Axon Body 3 cameras, Axon Fleet cameras and Axon Air Drones. RapidSOS supports more than 4,800 emergency communications centers.

* Cellebrite: Cellebrite completed a demo integration with Axon Evidence in April. Upon complete integration, Cellebrite’s Pathfinder software will have the option to save device extraction data, such as from a mobile device, laptop, or drone, and the accompanying analytics directly to Axon Evidence. Separately, Axon also has agreed to invest $90 m in Cellebrite via an oversubscribed PIPE transaction in connection with Cellebrite’s business combination with TWC Tech Holdings II Corp., a publicly-traded SPAC sponsored by True Wind Capital. Cellebrite is the market leader in digital intelligence — allowing agencies to collect, review, analyze, and manage investigative data from a broad range of digital sources such as mobile devices and PCs — and its solutions have been purchased by 6,700 public safety agencies and private sector enterprises in over 140 countries, helping ms of investigations globally. Cellebrite’s solutions are complementary with Axon’s and empower investigators to accelerate justice in legally sanctioned investigations.

Summary of Q1 2021 results:

* Revenue of $195m grew 33% year over year, on top of 27% growth in Q1 2020, reflecting strengthened demand across our product lines. Domestic revenue grew 37% in the quarter and international revenue grew 17%.

* Gross margin of 63.3% improved 310 basis points year over year, and was its highest in 10 quarters, reflecting strong demand for our premium TASER offerings, engineered lower build costs in our TASER segment and fixed-cost leverage.

o Although we have experienced port constraints and some increases in raw materials costs, we have remained focused on closely monitoring our supply chain, and mitigating impacts to keep our gross margins predictable and our inventory steady. For instance, during the recent global slowdown in manufacturing affected by the blockage in the Suez Canal, we duplicated orders by ocean and air, and worked with suppliers to hold higher buffers for Axon on their shelves. We have also worked to mitigate raw materials cost increases through supplier negotiations and purchasing added non-expiring raw materials. We continue to bolster our strategic relationships in our supply chain, work to identify secondary sourcing, and build in shipping and inventory buffers, which has kept our supply chain execution solid.

* Operating expenses of $174m included $88.1m in stock-based compensation expense.

o SG&A of $127m included $71.0m in stock-based compensation expense.

o R&D of $47m included $17.1m in stock-based compensation expense.

o We recognized $75m in expenses related to our eXponential Stock Performance Plan (“XSPP”) and CEO Performance Award in the first quarter. As of Q1 2021, all 12 operational goals are considered probable.

* In Q1 2021, $9.8m of stock-based compensation expense was tied to “catch up” expenses due to a 12th tranche being considered probable of attainment, $41.6 m was tied to acceleration in expected attainment dates, which means the time over which we record expense is shortened, and $6.5 m was tied to achieving a tranche in Q4 2020 that was certified as achieved during Q1 2021.

* Since the CEO Performance Award was adopted in 2018, we have expensed $132.4 m of total potential expense of $246.0 m under the plan. Since the XSPP plan was adopted in 2019, we have expensed $94.8 m of total potential expense of $191.5 m currently projected under the plan for XSPP grants issued to date.

* For more details about these innovative stock-based compensation plans, which were approved by shareholders and align the interests of management and employees with shareholders, please see our online FAQ at investor.axon.com.

* GAAP diluted EPS was ($0.75) based on GAAP net loss of $48 m. GAAP EPS was lower by approximately $1.33 due to expenses related to stock-based compensation. Non-GAAP EPS was $0.31.

* Quarterly Adjusted EBITDA grew 53% year over year to $45.8m, representing a 23.5% margin on revenue.

* Cash and cash equivalents and investments totaled $674m at March 31, 2021. Operating cash flow of $61m was offset by a $20m investment in RapidSOS (see strategic partnership update, above) and $10.5m in capital expenditures.

* Axon has no debt.

Financial commentary by segment:

TASER

* TASER segment revenue of $99m grew 30% year over year on strong demand in the US, Canada and Brazil. The sequential decline is tied to seasonality. Also, Q4 2020 benefitted from a $20m order from an international customer.

* Gross margin increased to 66.7%, the highest for the segment since Q3 2018, as we realized the benefits of strong demand for our premium TASER offerings and engineered lower build costs.

Software & Sensors

* Axon Cloud revenue grew 34% year over year, reflecting growing adoption of our software features.

* Axon Cloud gross margin of 75.1% includes expected costs to scale our cloud business. This includes low-to-no margin professional services costs, as well as expenses tied to standing up new cloud environments in new markets and geographies. We expect these factors to pressure gross margins as we further scale our cloud business. The software-only revenue in this segment, which includes cloud storage and compute costs, has consistently carried a gross margin above 80%.

* Sensors & Other revenue grew 36% year over year, reflecting healthy demand for our body camera and Fleet hardware.

* Sensors & Other gross margin was 41.1%. As a reminder, we manage toward a 25% gross margin for camera and sensors hardware, and the gross margin will fluctuate quarter to quarter depending on the customer mix.

Forward-looking performance indicators:

* Annual Recurring Revenue (“ARR”) grew 39% year over year to $242m. On a sequential basis, ARR increased by $21m, reflecting robust customer demand for our growing suite of software tools.

* Net revenue retention was 119% in the quarter, reflecting our ability to deliver additional value to our customers over time and our de minimis annual churn rates. We drive adoption of our cloud software solutions through integrated bundling. We are seeing major cities upgrading their subscriptions at individual net dollar retention rates of 150% to 400% to take advantage of our growing suite of productivity and digital evidence management tools. Our law enforcement agency customers often sign up for five to ten-year subscriptions. This SaaS metric purposely excludes the hardware portion of customer subscriptions. We further define this metric under “Statistical Definitions.”

* Total company future contracted revenue grew to $1.79bn.

* The percentage of TASER devices sold on a subscription was 64% in the quarter. As a reminder, Axon is transitioning its TASER hardware business into a subscription service. Domestic subscription orders were 70% of TASER devices sold in the quarter, reflecting this successful transition. International subscription rates are trending positively, and new markets often start out on a non-subscription basis, and we transition them to subscription over time.

Outlook:

The following forward-looking statements reflect Axon’s expectations as of May 6, 2021, and are subject to risks and uncertainties. As our investments are yielding results ahead of our expectations thus far in 2021, we intend to continue investing for growth.

Our updated 2021 outlook is as follows:

* We expect to achieve revenue in the range of $780m to $820m, which represents a $40m increase at the midpoint over the $740m to $780m expectation communicated in February.

* We are raising our expectations for Adjusted EBITDA to $140m to $150m, up from $125 m to $140 m previously.

o We provide Adjusted EBITDA guidance, rather than net income guidance, due to the inherent difficulty of forecasting certain types of expenses such as stock-based compensation and income tax expenses, which affect net income but do not affect Adjusted EBITDA. We are unable to reasonably estimate the impact of such expenses, if any, on net income. Accordingly, we do not provide a reconciliation of projected net income to projected Adjusted EBITDA.

* We expect stock-based compensation expense to be at least $175 m for the full year. However, as our stock-based compensation expense may fluctuate significantly based on changes in the probability of attaining certain operational metrics or attainment of such metrics and with changes in the expected or actual timing of such attainment, it is inherently difficult to forecast future stock-based compensation expense.

* Our expectations for capital expenditures of approximately $65m to $70m in 2021 are unchanged. These include investments to support capacity expansion and automation on TASER device and cartridge manufacturing, and are discussed in greater detail in our Q4 2020 shareholder letter.

* As we execute upon a scaling global profile and rapid 2021 growth, our early view of the business in 2022 includes approximately $920 m in revenue. We are extremely proud of the high level of execution from our teams that has set us up for continued top-line strength, solid margin performance and increased profitability.

Thank you for joining us on our growth journey,

Rick Smith, CEO

Luke Larson, President

Jawad Ahsan, CFO (Source: PR Newswire)

 

07 May 21. Meggitt targeted by foreign predators in latest flurry of pandemic plundering. Defence and aerospace group Meggitt is being circled by US rival Woodward, in a move that threatens to further pummel Britain’s world-leading engineering industry.

The Covid-19 outbreak sent markets into freefall in February last year, wiping significant value off many companies which still have not fully recovered.

That has made them appear good value to suitors who have been accused of ‘pandemic plundering’.

Russ Mould, investment director at AJ Bell, said: ‘Two private equity approaches in two days – one for John Laing from KKR and one for St Modwen from Blackstone – add to a growing list of takeover offers for UK-listed companies, to suggest there is still value to be had. The number of bids suggests that someone, somewhere – be they trade or financial buyers – feel UK companies are still going cheap.’

John Laing, St Modwen and Meggitt shares are all trading at a lower value than before the pandemic struck last year.

The latest string of takeover talks raises fresh questions about whether UK rules are too lax.

Meggitt’s sale would deal another blow to Britain’s engineering and defence industry – which has already been hit by the sale of companies such as Laird and Cobham over the last few years. Based in Dorset, Meggitt’s history reaches back to the 1850s, when its predecessor invented hi-tech, pioneering devices such as the first altimeter for the hot air balloon.

The defence and aerospace group has more recently counted industry giants BAE Systems, Boeing, Lockheed Martin and Rolls-Royce among its customers. And its work includes making parts for Boeing’s 737 Max planes and radar technology on the RAF’s Typhoon fighter jet.

St Modwen has three business divisions – one of which is a logistics arm that has enough land to build 19m sq ft of warehouse space in the next few years.

The boom in online shopping during Covid has sent demand for warehouse space sky high. (Source: Google/https://www.thisismoney.co.uk/)

 

06 May 21. Huntington Ingalls bullish on unmanned growth. America’s largest military shipbuilder, Huntington Ingalls Industries, is known for aircraft carriers and large-deck amphibious ships, but its corporate strategy is sighted in on much smaller platforms.

On the Newport News, Virginia-based firm’s quarterly earnings call Thursday, executives highlighted that HII has been on a spending spree to boost its unmanned business, which is part of its Technical Solutions unit. The comments come even as the U.S. Navy’s still-evolving unmanned plans have seen pushback on Capitol Hill.

“In the Technical Solutions space, we’ve made a big investment in unmanned. An expansion of the unmanned business, I think, is something that — now that we’ve made that investment and we have a portfolio — it’s up to us to make sure that we capture that expansion,” said HII Chief Financial Officer Tom Stiehle. “Of all the budget items that I see out there, the unmanned budget item is probably going to have the largest percentage growth over the next five years, in my view.”

HII’s purchase of Spatial Integrated Systems in April follows last year’s acquisition of Hydroid, its strategic alliance with Kongsberg Maritime and its equity investment in Sea Machines Robotics.

In January, HII completed the first phase of its Unmanned Systems Center of Excellence with the construction of a 22,000-square-foot facility in Hampton, Virginia. The center will host the assembly of hull structures for Boeing’s Orca for the Navy’s Extra Large Unmanned Undersea Vehicle program. A second building for unmanned systems prototyping, production and testing is scheduled to be built by year’s end.

The company disclosed Thursday that about 75 percent of all the Orca’s structural components have been fabricated and that final delivery to Boeing is set for later this year.

What sort of returns HII is seeing for its unmanned systems in the near term is not entirely clear. The company said its Technical Solutions business unit, which oversees unmanned systems, saw an 18 percent decline in revenue (after divesting its oil and gas business and the San Diego shipyard). But when asked on the call, executives declined to provide details about its unmanned systems alone.

The Navy signaled with its long-discussed Unmanned Campaign Plan last month that it wants to shift its focus from building large, expensive platforms toward meeting naval requirements with unmanned systems. However, sea power advocates in Congress were critical of the document and have been emphasizing crewed ships until the Navy successfully demonstrates the technical foundations of unmanned systems.

The Navy, in fiscal 2021 and beyond, wants to develop and procure large, medium and extra-large unmanned vehicles. However, amid skepticism in Congress over the Navy’s ability to quickly develop new technologies, lawmakers provided $238.9m of the $579.9m in research and development funding the Navy requested.

Defense News previously reported that the Navy is likely to delay its Large Unmanned Surface Vehicle program by a year amid resistance from Congress. The most recent annual defense policy law barred the Navy from fielding the MK 41 Vertical Launching System on LUSVs and ordered it to explore a range of vessel types as alternatives.

The Navy last week kicked off its first multidomain manned and unmanned capabilities exercise, Unmanned Integrated Battle Problem 21. The exercise was set to feature operational unmanned systems such as the MQ-9 Sea Guardian UAV, the medium-displacement unmanned surface vessels Sea Hunter and Sea Hawk, and small and medium unmanned undersea vehicles with modular payloads, the Navy said.

(Source: Defense News)

 

06 May 21. Magellan Aerospace Corporation Announces Financial Results.

Magellan Aerospace Corporation (“Magellan” or the “Corporation”) released its financial results for the first quarter of 2021. All amounts are expressed in Canadian dollars unless otherwise indicated. The results are summarized as follows:

“1. Overview

A summary of Magellan’s business and significant updates

Magellan is a diversified supplier of components to the aerospace industry. Through its wholly owned subsidiaries, controlled entity and joint venture, Magellan designs, engineers and manufactures aeroengine and aerostructure components for aerospace markets, including advanced products for defence and space markets, and complementary specialty products. The Corporation also supports the aftermarket through supply of spare parts as well as performing repair and overhaul services.

Magellan operates substantially all of its activities in one reportable segment, Aerospace, which is viewed as one segment by the chief operating decision-makers for the purpose of resource allocations, assessing performance and strategic planning. The Aerospace segment includes the design, development, manufacture, repair and overhaul, and sale of systems and components for defence and civil aviation.

Impact of COVID-19

In March 2020, due to the worsening public health crisis associated with the novel coronavirus (“COVID-19”), the World Health Organization (“WHO”) declared COVID-19 a global pandemic. Governments worldwide, including those countries in which Magellan operates, enacted emergency measures to combat the spread of the virus. These measures, which included the implementation of travel bans, self-imposed quarantine periods and social distancing, caused a material disruption to businesses globally resulting in an economic slowdown and decreased demand in the aerospace industry. Governments and central banks reacted with significant monetary and fiscal interventions designed to stabilize economic conditions and vaccination programs have been introduced to inoculate people against COVID-19; however, the situation continues to evolve (including the prevalence of virus variants), and the long-term success of these interventions is not yet determinable.

In the first quarter of 2021, the disruption to air travel and commercial activities, particularly within the aerospace and commercial airline industries continued to negatively impact global supply, demand and distribution capabilities. There are some positive signs of recovery in the market, however, the COVID-19 pandemic continues to adversely affect Magellan’s customers and their demand for the Corporation’s products and services. The situation remains dynamic and the ultimate duration and magnitude of the impact on the economy and the financial effect on the Corporation remains unknown at this time.

Financial impacts

The challenging economic climate may have material adverse impact on Magellan including, but not limited to, significant declines in revenue as the Corporation’s customers are concentrated in the aerospace industry; impairment charges to the Corporation’s property, plant and equipment, intangible assets and goodwill due to declines in revenue and cash flows; and restructuring charges as Magellan aligns its structure and personnel to the dynamic environment. Estimates and judgements made in the preparation of financial statements are increasingly difficult and subject to a high degree of measurement uncertainty during this volatile period.

Magellan has implemented measures to align its cost structure during the current market conditions, including headcount reductions and re-balancing work force; elimination of all non-essential travel, entertaining and other discretionary spending; and reductions to the capital expenditure plan. The carrying value of the Corporation’s long-lived assets are reviewed for indications of impairment at the end of each reporting period. At March 31, 2021, the Corporation reviewed each cash-generating unit and did not identify indications of impairment.

Operational impacts

During this pandemic, the aerospace manufacturing industry, in the jurisdictions the Corporation operates in, has been classified as an “essential service”. As a result, the Corporation’s operations remained open, but at reduced levels of activity during the first quarter of 2021.

To manage the additional safety risks presented by COVID-19, Magellan implemented standardized tools and methods to keep its employees safe and well informed. Magellan has implemented additional safety, sanitization and physical distancing procedures, including remote work sites where possible, and ceased all non-essential business travel. Magellan’s procedures are designed to align with recommendations from the WHO, the United States’ Centers for Disease Control and Prevention, and applicable federal, state and provincial government health authorities.

Liquidity

As at March 31, 2021, the Corporation ended with a cash balance of $71.3m and $70.5m of available borrowing capacity under Magellan’s operating credit facility, providing the Corporation with $141.8m of total liquidity. The credit facility agreement also includes a $75 m uncommitted accordion provision that provides the Corporation with the option to increase the size of the operating credit facility to $150m. Magellan expects that cash provided by operations, cash on hand and its sources of financing will be sufficient to meet the Corporation’s debt obligations and fund committed and future capital expenditures.

Business Update

On March 16, 2021, Magellan Aerospace announced the signing of a five year renewal agreement with Avio Aero, a GE Aviation Company, for the supply of magnesium and aluminum castings. The castings will be produced primarily at Magellan’s Haley, Ontario facility, with several also being produced at its Glendale, Arizona facility.

On March 31, 2021, Magellan Aerospace announced an agreement with Boeing Commercial Airplanes on a contract extension for the supply of landing gear kits and other complex structural components for the 737, 767, and 777 airplanes. The significant, long term contract extension will see product delivered from Magellan’s facilities in Kitchener, Ontario and New York City, New York. Magellan’s solution for Boeing Commercial Airplanes employs a vertical integration strategy utilizing global resources in Kitchener, New York City, and India. Magellan will deliver the kits and hardware direct to Boeing’s assembly facilities in Renton and Everett, Washington.

For additional information, please refer to the “Management’s Discussion and Analysis” section of the Corporation’s 2020 Annual Report available on www.sedar.com.

2. Results of Operations

A discussion of Magellan’s operating results for the first quarter ended March 31, 2021

The Corporation reported revenue in the first quarter of 2021 of $176.3m, a $62.5m decrease from the first quarter of 2020 revenue of $238.8m. Gross profit and net income for the first quarter of 2021 were $17.1m and $3.3m, respectively, in comparison to gross profit of $36.8m and net income of $20.1m for the first quarter of 2020.

Consolidated Revenue

The COVID-19 pandemic and resulting economic contraction, including the continued disruption to air travel and commercial activities, particularly within the commercial aerospace industry, continue to have a negative impact on demand for the Corporation’s aerospace products and services.

Revenues in Canada decreased 14.0% in the first quarter of 2021 compared to the corresponding period in 2020, primarily due to decreased volumes for casting and proprietary products.

Revenues in the United States decreased by 29.2% in the first quarter of 2021 compared to the first quarter of 2020 primarily due to volume decreases for wide-body aircraft and aeroengine products.

European revenues in the first quarter of 2021 decreased 38.1% compared to the corresponding period in 2020 primarily driven by build rate reductions for both single aisle and wide-body aircraft.

Gross Profit

Gross profit of $17.1 m for the first quarter of 2021 was $19.7m lower than the $36.8m gross profit for the first quarter of 2020, and gross profit as a percentage of revenues of 9.7% for the first quarter of 2021 decreased from 15.4% recorded in the same period in 2020. The gross profit in the current quarter was primarily impacted by volume decreases, higher production costs and unfavourable product mix.

Administrative and General Expenses

Administrative and general expenses as a percentage of revenues of 6.6% for the first quarter of 2021 were consistent with the same period of 2020. Administrative and general expenses decreased $4.0m or 25.7% to $11.6m in the first quarter of 2021 compared to $15.7m in the first quarter of 2020 mainly due to lower salary and related expenses and lower discretionary spending to align with current business volumes.

Restructuring

Restructuring cost of $176m incurred in the first quarter of 2021 mainly related to the closure of the Bournemouth manufacturing facilities announced in the fourth quarter of 2020.

Other

Other income for the first quarter of 2021 included a $0.8m foreign exchange gain compared to a $5.8m foreign exchange gain in the first quarter of the prior year. The movements in balances denominated in foreign currencies and the fluctuations of the foreign exchange rates impact the net foreign exchange gain or loss recorded in a quarter.

Interest Expense

Total interest expense of $0.9m in the first quarter of 2021 decreased $0.3m compared to the first quarter of 2020 mainly due to lower accretion charge on lease liabilities and long-term debt as principal amounts decreased, and lower discount on sale of accounts receivables due to lower volume of receivables sold in the current quarter. (Source: BUSINESS WIRE)

 

06 May 21. Leonardo: revenues at €2,790m (+7.7% YoY), EBITA at € 95m (+132% YoY). FOCF € -1,422 m improved for €173m YoY. Group Net Debt at €4,640m (+5.6%). These in summary are 1Q 2021 key performance indicators. FY2021 Guidance confirmed. Continued confidence in medium-long term core business fundamentals.

Results in line with our plan

* Continued strength of military/governmental

* Strong backlog of €36.4bn

* Order intake of €3.4bn, less relying on large scale orders

* Book to bill at 1.2x

* EBITA of € 95 m, up 132%, with robust and higher profitability across the Group, besides aerostructures

* Cash flow, negative for €1.4bn, improving in line with plan and reflecting usual seasonality

Leonardo and HENSOLDT

* Strong industrial and strategic rationale

* Closer co-operation and complementary strengths

* Value creation through enhanced market access and key platform exposure

* Maintaining a solid capital structure also through disposals and DRS listing

FY 2021 Guidance confirmed

Confidence in medium/long term outlook

* Solid military/governmental

* Planned recovery actions in the civil side of the business

* Solid backlog and order intake

* Leveraging existing assets, technologies and transversal capabilities to catch new opportunities

Leonardo’s Board of Directors, convened today under the Chairmanship of Luciano Carta, examined and unanimously approved results of the first quarter 2021.

The results for the first quarter of 2021 were in line with the expectation of a recovery in growth and an increase in profitability reported in the Integrated Report at 31 December 2020, showing a marked improvement in the Group’s industrial performance; in the first quarter of 2020 this indicator was in fact particularly affected by the outbreak of the COVID-19 pandemic, which then gradually stabilised over the following months, also as a result of the measures put in place in order to ensure that the business could continue in full operation.

This trend shows the resilience of the military/governmental business, in a scenario that is still affected by the pandemic. Otherwise, the critical issues that have been reported in the civil aviation sector in recent months have been confirmed, in particular, Aerostructures experienced the challenges associated with a fall in volumes and the consequent failure to absorb fixed costs, which led to a decline in results compared to the first quarter of 2020.

Alessandro Profumo, Leonardo CEO, stated “First quarter 2021 results are in line with our expectations when we recently set out our guidance for the full year. We have continued to achieve good order intake and our strong backlog has supported growing revenues. Our profitability has remained robust and our cash flow is improving, in line with plan. Our solid military and governmental business offset the impact of the Covid pandemic on the civil side. The acquisition of the 25.1% stake in HENSOLDT represents a long-term operation strengthening our portfolio in the strategic defence electronics business in sensor solutions. The investment and partnership is very exciting, giving us the opportunity for value creation through enhanced global market access, and increasing our competitiveness on key platforms. Our solid capital structure will be maintained also through disposals and DRS listing. We remain fully focused to create value sustainably for all our stakeholders”.

 

06 May 21. FLIR Systems Announces First Quarter 2021 Financial Results.

– First Quarter Revenue of $467.3m; Growth of 3.6% over Prior Year Quarter

– Bookings of $484.5m in the First Quarter Representing a Book-to-bill Ratio of 1.04

– First Quarter GAAP Diluted Earnings Per Share (“EPS”) of $0.29

– First Quarter Adjusted Diluted EPS of $0.49; Growth of 16.7% over Prior Year Quarter

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 first quarter ended March 31, 2021.

Commenting on FLIR’s first quarter results, Jim Cannon, President and Chief Executive Officer, said, “We are pleased to announce a strong start to 2021 with revenue growth of 3.6% over the prior year quarter. Our efforts to secure a robust, sustainable pipeline have begun to take root, led by strong bookings and backlog from unmanned systems to end the quarter with a book-to-bill ratio of 1.04. Importantly, we are noticing a recovery in our core Industrial Technologies markets, contributing to the solid performance despite headwinds from EST sales in the prior year. We continue to realize benefits of the cost optimization efforts taken last year as part of Project Be Ready, as underscored by adjusted diluted EPS growth of 16.7% over the prior year quarter.”

Mr. Cannon added, “We are excited to leverage this momentum as we complete our combination with Teledyne Technologies to become an even stronger organization positioned for sustainable profitable growth. We have made significant progress toward our target close date within the quarter and look forward to the upcoming stockholder meetings to approve the transaction on May 13.”

Summary Results

Revenues for the quarter were $467.3m compared to $450.9m in the prior year quarter, representing an increase of 3.6%. Bookings totaled $484.5m in the quarter, representing a book-to-bill ratio of 1.04. Backlog at the end of the quarter was $815.2m, reflecting a 5.1% decrease relative to the prior year quarter which included approximately $100.0m of bookings for elevated skin temperature (“EST”) solutions.

GAAP Earnings Results

Gross profit for the quarter was $209.2m, compared to $219.4m in the prior year quarter. Gross margin decreased to 44.8% from 48.6% in the prior year quarter, primarily attributable to the ramp up of lower margin programs and product mix in the Defense Technologies segment. Earnings from operations for the quarter were $52.5m, compared to $28.5m in the prior year quarter. Operating margin increased to 11.2% from 6.3% in the prior year quarter, primarily due to decreases in restructuring expenses, operating expense reductions from Project Be Ready, and decreases in marketing and travel costs. The favorable impacts were partially offset by the aforementioned lower gross profit and expenses related to the merger with Teledyne Technologies Incorporated (“Teledyne”). Diluted EPS was $0.29, compared to $0.11 in the prior year quarter.

The weighted average diluted share count for the quarter was 133m, down from 135m in the prior year quarter primarily due to stock repurchase activity in the first quarter of 2020.

Non-GAAP Earnings Results

Adjusted gross profit for the quarter was $218.8m, compared to $229.5m in the prior year quarter. Adjusted gross margin decreased to 46.8% from 50.9% in the prior year quarter, primarily attributable to the ramp up of lower margin programs and product mix in the Defense Technologies segment. Adjusted operating income for the quarter was $82.6m, compared to $75.5m in the prior year quarter. Adjusted operating margin increased to 17.7% from 16.7% in the prior year quarter, primarily due to operating expense reductions from Project Be Ready and decreases in marketing and travel costs, partially offset by the aforementioned lower adjusted gross profit. Adjusted diluted EPS was $0.49, compared to $0.42 in the prior year quarter.

Segment Results

Industrial Technologies Segment

Industrial Technologies revenues for the quarter were $274.9m, representing a decrease of $1.6m, or 0.6%, compared to the prior year quarter. The revenue decrease was primarily attributable to reduced volume for EST solutions, partially offset by increased demand in certain commercial end markets such as maritime products.

Industrial Technologies segment operating income was $76.9 m, compared to $64.3m in the prior year quarter. Segment operating margin increased to 28.0% from 23.2% in the prior year quarter, primarily attributable to operating expense reductions from Project Be Ready and decreases in marketing and travel costs.

Industrial Technologies bookings totaled $273.1m for the quarter, representing a book-to-bill ratio of 0.99. Backlog at the end of the quarter was $273.5m, reflecting a 17.1% decrease relative to the prior year quarter, primarily the result of lower EST volume, partially offset by increased order activity in certain commercial end markets such as maritime products.

Defense Technologies Segment

Defense Technologies revenues for the quarter were $192.4m, representing an increase of $17.9m, or 10.3%, compared to the prior year quarter. The revenue increase was primarily attributable to increased volume on several unmanned systems programs, partially offset by shipment timing and the completion of certain contracts that contributed to revenue in the prior year quarter.

Defense Technologies segment operating income was $25.4m compared to $33.2m in the prior year quarter. Segment operating margin decreased to 13.2% from 19.0% in the prior year quarter, primarily attributable to the ramp up of lower margin programs and product mix.

Defense Technologies bookings totaled $211.5m for the quarter, representing a book-to-bill ratio of 1.10. Backlog at the end of the quarter was $541.8m, reflecting a 2.4% increase relative to the prior year quarter, primarily due to program awards for unmanned systems.

Corporate Developments

Merger with Teledyne

On January 4, 2021, we entered into a definitive agreement to be acquired by Teledyne (the “Teledyne transaction”), a manufacturer and supplier of sophisticated instrumentation, digital imaging products and software, aerospace and defense electronics, and engineered systems. The Teledyne transaction will enable the combined company to create a stronger platform for growth and innovation and be even better positioned to meet the evolving needs of our customers, drive stockholder value and create new opportunities for our employees. Together, we will offer a uniquely complementary end-to-end portfolio of sensory technologies for all key domains and applications across a well-balanced, global customer base. In addition, both our business models include serving respective markets and customers with sensors, cameras and sensor systems.

The transaction is expected to close on May 14, 2021 subject to the receipt of approvals of Teledyne and FLIR stockholders and other customary closing conditions.

Balance Sheet and Liquidity

FLIR ended the quarter with $277.3m in cash and cash equivalents and approximately $634.6m in borrowing capacity under its credit facility based on current profitability levels and leverage covenants.

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 June 4, 2021 to shareholders of record as of close of business on May 21, 2021. In the event that the Teledyne transaction closes prior to May 21, 2021, the dividend will not be paid.

 

05 May 21. NEC Corporation of America Launches FOCI-Mitigated Subsidiary to Provide Advanced Technology Solutions to the US Government.

NEC NSS Provides Access to World Class Biometric and Identity, Artificial Intelligence, Machine Learning and Computer Vision Applications.

NEC Corporation of America (NEC), a leading technology integrator of advanced IT, networking, communications, and multimodal biometric solutions, is proud to announce the launch of their newest company, NEC National Security Systems, Inc. (NSS).

As a global leader in advanced technology solutions, the launch of the Foreign Ownership, Control or Influence (FOCI)-mitigated subsidiary under an anticipated Special Security Agreement with the U.S. Government will allow NEC to provide its world-class innovations in a specialized manner to the United States government.

NSS currently offers integrated hardware and software solutions to support critical national security, intelligence, homeland defense, immigration, and law enforcement missions across the U.S. Federal Government.

The company’s main customers include the Department of Homeland Security, Department of Defense, Department of State, Department of Justice, and the U.S. Intelligence Community.

The NSS executive team is led by President Benji Hutchinson, an industry veteran and leader in biometrics and AI, and Patricia Ford, Facility Security Officer, who shall oversee compliance requirements for the company’s anticipated Top Secret Facility Clearance Level (FCL).

The NSS Board of directors is comprised of a distinguished group of executives who have deep experience in advance IT applications, experience in government procurement, and a strong understanding of the needs of federal agencies. These members include: Kay Kapoor, CEO of Arya-Technologies and former VP and COO of Lockheed Martin Corporation; Francis X Taylor, Principal at Cambridge Global Advisors, President and CEO of FXTaylor Associates, and former Undersecretary for Intelligence and Analysis at the Department of Homeland Security; and Michael Vickers, former Undersecretary of Defense for Intelligence and former CIA Officer.

“Our team is honored to support the public servants that make up these critical agencies within the U.S. government,” said Mr. Hutchinson. “We are eager to open up new opportunities to provide technology solutions that will make a difference in their daily mission.”

From machine learning to computer vision, fiber optics to next-generation identity, NEC is a leading provider of the technologies that are changing the way the government does business. NEC NSS tools have a wide variety of applications in access control, scene processing, advanced analytics and border & transportation security, among others. Many of these offerings are in high demand in an increasingly touchless, post COVID-19 world that improve the customer and employee user experience, promote hygiene as well as cost-savings and efficiencies.

As a new company, NSS will inherit the NEC legacy of dedication to innovation and improvement. The NEC Corporation’s annual investments of more than $1.01bn into research and development helps ensure NSS can provide the world’s most advanced artificial intelligence, computer vision and identity technology.

About NEC National Security Solutions

NEC National Security Solutions, Inc. (NSS), is a leading provider of biometric identity and AI technology for federal government agencies in defense, intelligence, law enforcement, and homeland security agencies. Based in Arlington, Va., NSS deploys proven groundbreaking technology for access control, identity verification, scene processing, advanced analytics, fiber optic sensing, border control and transportation security, among other applications. The company was launched in 2020 as a wholly owned subsidiary of NEC Corporation of America and will operate under a Special Security Agreement (SSA) with the US Government as a FOCI-mitigated entity, free of foreign ownership, control, and influence. It provides full-service solutions for large agencies using the intellectual property and resources of the global NEC brand. The NEC Corporation invests an estimated $1.01 billion annually in R&D, holds 47,000 patents, and has more than 110,000 employees in 160+ countries. For more information, please visit www.necnss.com.

(Source: BUSINESS WIRE)

 

05 May 21. Parsons Reports First Quarter 2021 Results.

Q1 2021 Financial Highlights

– Revenue of $875m, includes $64m of net adverse impact from COVID-19 and pass-through revenue

– Net income of $9m and margin of 1.0%

– Adjusted EBITDA of $69m and margin of 7.9%

– Book-to-bill ratio of 1.2x, driven by Critical Infrastructure book-to-bill ratio of 1.4x

– Total backlog increased 4.7% from the first quarter of 2020

Strategic Highlights

– Strong Q1 2021 with six contract wins over $100m; great start to Q2 2021 with approximately $1 bn in contract wins in the quarter

– Strong Braxton performance and integration

– Recognized as a top employer by leading minority, women, and human rights organizations

– Updated executive compensation policy to tie a portion to core values including diversity, integrity, safety, and sustainability

Parsons Corporation (NYSE: PSN) today announced financial results for the first quarter ended March 31, 2021.

CEO Commentary

“We delivered strong bookings and significant margin expansion with results in line with our internal expectations and historical seasonal patterns. We continue to win large new contracts and I credit that to our focus on technology solutions and our exceptional team,” said Chuck Harrington, chairman and chief executive officer of Parsons Corporation. “We are off to a strong start to the second quarter with approximately $1 bn of awards, and we are excited about our positions in growing and enduring markets in both segments. Revenue growth will accelerate while margins will continue to expand and free cash flow conversion will remain strong as we benefit from our technology solutions aligned with the Biden Administration’s infrastructure and defense priorities and as we move beyond COVID and pass-through revenue headwinds. We will also continue to leverage our robust balance sheet for accretive acquisitions in line with our targeted M&A strategy.”

First Quarter 2021 Results

Total revenue for the first quarter of 2021 decreased by $96m, or 10%, from the prior year period to $875 m. This decrease was primarily driven by $64m of contract work impacted by the COVID-19 pandemic and lower pass-through revenue. Operating income increased 8% to $26m primarily due to increased contract profitability, including contributions from the company’s high-margin Braxton acquisition. Net income decreased to $9m and net income margin decreased to 1.0% from the prior year period. Diluted earnings per share (EPS) attributable to Parsons was $0.09 in the first quarter of 2021, compared to $0.13 in the prior year period.

Adjusted EBITDA including noncontrolling interests for the first quarter of 2021 was $69m, a 14% increase over the prior year period. Adjusted EBITDA margin increased 170 basis points to 7.9%. Adjusted EPS increased to $0.34, compared to $0.33 in the first quarter of 2020.

Segment Results

Federal Solutions Segment

First quarter 2021 revenue decreased $26m, or 5%, compared to the prior year period primarily due to approximately $27m of net contract work impacted by COVID-19 and lower pass-through revenue, and contract transitions, offset by $31m of acquisition revenue.

First quarter 2021 Federal Solutions adjusted EBITDA including noncontrolling interests increased by $0.3 m, or 1%, compared to the prior year period. Adjusted EBITDA margin increased 50 basis points to 7.1% from the first quarter of 2020. Adjusted EBITDA was relatively flat with the prior year period and the increase in adjusted EBITDA margin was driven by increased contract profitability and contributions from the Braxton acquisition.

Critical Infrastructure Segment

First quarter 2021 Critical Infrastructure revenue decreased $71 m, or 14%, compared to the prior year period. The decrease was primarily driven by approximately $37m of net contract work impacted by COVID-19 and lower volume on contracts with pass-through revenue, as well as contract transitions.

First quarter 2021 adjusted EBITDA including noncontrolling interests increased by $8m, or 27%, compared to the prior year period. Adjusted EBITDA margin increased 280 basis points to 8.7%. These increases were primarily driven by lower selling, general and administrative expenses and increased contract profitability.

First Quarter 2021 Key Performance Indicators

• Book-to-bill ratio (first quarter): 1.2x on net bookings of $1.0bn. Book-to-bill ratio (trailing twelve-months): 1.1x on net bookings of $4.2 bn.
• Total backlog: $8.2bn, a 4.7% increase from the first quarter of 2020.
• Cash flow used in operating activities: First quarter 2021:$66m, compared to cash flow used in operating activities of $119m in the first quarter of 2020.
• Net Debt: Cash and cash equivalents were $398m and total debt was $640m. The company’s net debt to trailing twelve-month adjusted EBITDA leverage ratio at the end of the first quarter of 2021 was 0.7x. The company defines net debt as total debt less cash and cash equivalents.

Recent Significant Contract Wins

Parsons continues to win large strategic contracts in growing and enduring markets. During the first quarter of 2021, the company won six contracts worth over $100m. In addition, since the end Q1 2021, the company has won contracts totaling approximately $1bn to date.

• Awarded a $618m contract by the General Services Administration (GSA) after the end of Q1 2021 for solutions that advance C5ISR, exercises, operations, and information services (CEOIS) for global partners including the Combatant Commands, Department of State, service components and Director of National Intelligence agencies.
• Booked $140m of work under the U.S. Postal Service’s (USPS) Nationwide Program Management Services (PMS) contract. Parsons’ experience in program management, architectural and engineering design, and construction management supports the USPS’ ongoing modernization and Americans with Disabilities Act access efforts ensuring uninterrupted delivery of reliable and affordable mail service to our nation and expanding access to USPS facilities.
• Awarded a $114m contract by Ashghal, the Public Works Authority of Qatar (PWA), to provide program and construction management services. Parsons has been a trusted partner for the PWA for over 20 years, and this project will continue to enhance the state of Qatar’s infrastructure by improving livability for residents and advancing future development plans.
• Awarded an $80m contract for program management by the Architect of the Capitol, Washington D.C., ensuring the continued progress and excellence of their projects from the U.S Capitol Campus; Northern Virginia; Fort Meade, Md.; and the Blue Plains Complex located in S.E Washington, D.C.
• Awarded a 94m CAD (~ $75m USD) contract for new construction management work for remediation efforts on the Giant Mine in the Northwest Territories, Canada. The amended contract, for one of the largest environmental remediation projects in Canada, includes freeze pad construction for the highly innovative thermosyphon-based process that will freeze the arsenic trioxide waste in place at the mine improving the environment and health and safety of local residents and wildlife.
• Awarded a $69m contract by the U.S. Army Combat Capabilities Development Command Army Research Laboratory to develop exploratory, disruptive technology that will provide United States warfighters with the technological edge as part of the Army’s future vision.
• Awarded a $45m contract by the Central Texas Regional Mobility Authority for design work on improvements to United States Highway 183. These improvements will advance mobility goals in the region, providing a reliable transit route for motorists and emergency response crews, while building connections for shared use, including sidewalks and paths for bicycles and pedestrians with goals of reduced carbon emissions and improved safety for motorists, pedestrians, and cyclists.
• Awarded a $12.6bn multiple-award indefinite-delivery, indefinite-quantity (IDIQ) contract by the Defense Intelligence Agency (DIA) for the Solutions for Information Technology Enterprise III (SITE III). The SITE III contract provides managed services directed towards improving integration, information sharing, and information safeguarding through the use of a streamlined information technology (IT) approach.
• Awarded a $2bn multiple-award IDIQ contract by the U.S. Air Force Civil Engineer Center for architecture engineering capabilities, including design, construction management, and the restoration and modernization of Air Force Bases worldwide. Parsons looks forward to bringing advances in energy efficiency, climate resiliency, and application of renewable sources to maximize each installation’s potential and drive overall mission success.
• Awarded a $250m multiple-award IDIQ contract by the Naval Information Warfare Center (NIWC) Pacific for research, development, test, and technical engineering for maritime intelligence, surveillance, and reconnaissance (ISR) and information operations.
• Awarded a $100m multiple-award IDIQ contract by NIWC Pacific for support in the identification, implementation, development, and enhancement of Command, Control, Communications, Computers, & Intelligence (C4I) and the network-centric warfare.

Recent Additional Corporate Highlights

Parsons continues to be recognized for its long-standing industry leading Environmental, Social and Governance (ESG) initiatives. During the quarter, Parsons won distinguished awards for its hiring, diversity, and ethical business practices. In addition, the company updated its executive compensation policies to tie a portion to its core values.

• Announced that Parsons’ board of directors elected Carey Smith as chief executive officer, effective July 1st, 2021. Ms. Smith succeeds Charles “Chuck” Harrington, who announced his retirement after nearly 40 years with the company. Harrington will continue to serve on Parsons’ Board as executive chairman upon his retirement.
• Recognized as a top 50 company by both Minority Engineer Magazine and Woman Engineer Magazine. These publications select the top companies in the country for which they would most like to work or whom they believe would provide a positive working environment for minority and women engineers.
• Recognized by the Human Rights Campaign Foundation’s 2021 Corporate Equality Index for its active support and inclusion of the lesbian, gay, bisexual, transgender, questioning (LGBTQ+) community.
• Named by Ethisphere as one of the 2021 World’s Most Ethical Companies®. The company has been honored with this recognition for 12 consecutive years.
• Parsons’ Braxton subsidiary has been awarded the prestigious Tibbitts Award, which recognizes excellence in Small Business Innovation and Research (SBIR) and Small Business Technology Transfer efforts.
• Parsons Board meets quarterly to discuss its ESG initiatives and starting in 2021 the company’s CEO and other named executive officers will have a portion of their annual bonuses tied to the company’s core values of diversity, integrity, safety, sustainability, quality, and innovation, of which employee diversity is the largest component.

Fiscal Year 2021 Guidance

The company is reiterating the fiscal year 2021 guidance it issued on February 24, 2021, based on its financial results for the first quarter of 2021 and its current outlook for the remainder of year. The table below summarizes the company’s fiscal year 2021 guidance.

Net income guidance is not presented as the company believes volatility associated with interest, taxes, depreciation, amortization and other matters affecting net income, including but not limited to one-time and nonrecurring events and impact of M&A, will preclude the company from providing accurate net income guidance for fiscal year 2021.

(Source: PR Newswire)

 

06 May 21. First quarter of 2021: Rheinmetall posts strong start to the year – operating result and margin more than doubled.

– Consolidated sales grow by 3.5% to €1,405m

– Consolidated operating result rises from €34m to €87m – an increase of €53m

– Margin more than doubles to 6.2% after 2.5% in same quarter of previous year

– Operating free cash flow improves by €129m to €-59m

– Earnings per share almost quadruple from €0.30 to €1.14

– Outlook for 2021 confirmed and adjusted to new reporting structure

The Düsseldorf-based Rheinmetall AG started fiscal 2021 with sales growth and significantly improved earnings in the first three months. In terms of sales, Rheinmetall benefited in the first quarter from the continuing economic recovery of the automotive industry and from ammunition deliveries that had originally been expected in the second quarter of 2021 but were moved forward by the customers. In addition to the sales growth, the increase in earnings resulted particularly from the cost reduction measures initiated in 2020 in response to the production declines in the automotive industry due to the pandemic.

The technology group is confirming its forecast from March this year for the sales and margin development in the current fiscal year, but is adjusting the figures to the changed reporting structure, in which the pistons business will be recognized as a discontinued operation from the second quarter of 2021 onward.

In the first quarter of 2021, Rheinmetall is reporting for the first time on the basis of a new Group structure that the company has established for itself as part of a strategic realignment and that discontinues the previous organizational separation into the Automotive and Defence sectors. The new structure is made up of five divisions plus the non-core business with pistons, which is not yet classified here as a discontinued operation. With this new positioning, Rheinmetall intends to focus more on forward-looking technologies and support business areas with high potential for a sustained increase in value.

Armin Papperger, Chief Executive Officer of Rheinmetall AG, comments: “Rheinmetall has made a dynamic start to a promising fiscal year. We are benefiting from the significant recovery in the automotive sector, from armed forces’ continuing procurement requirements, and from our strong cost discipline. The streamlining of the Group structure initiated as part of our strategic realignment will give rise to additional savings effects in the current fiscal year. At the same time, we are shaping ourselves as an integrated technology group and focusing on business areas with high potential for a sustained increase in value.”

Armin Papperger comments: “We are continuing to do well in operational terms. In business with automotive manufacturers, we have successfully achieved pioneering orders and are also further expanding our positions in the field of alternative drive technologies. Our defence technology business remains at a high level. We are very well positioned here to continue making valuable contributions to the modernization of military equipment and filling gaps in requirements in the German armed forces and in partner countries in the future.”

Rheinmetall Group

Rheinmetall increased its consolidated sales by €47m or 3.5% year-on-year to €1,405m in the first quarter of 2021 (previous year: €1,358m). Adjusted for currency effects, sales growth was 5.1%.

The order backlog in the Rheinmetall Group came to around €13.3bn on March 31, 2021. After €10.3 bn at the end of the first quarter of 2020, this corresponds to an increase of 29%. On top of this order backlog, there are also anticipated sales from existing framework agreements with military customers on a scale of around €3.5bn at present.

The operating result increased from €34m to €87m in the first quarter of 2021. This corresponds to growth of €53m or 157%. The operating margin of 6.2% also significantly exceeded the previous year’s level of 2.5%.

Consolidated earnings after taxes increased to €58m in the first quarter of 2021 after €18m in the same quarter of the previous year. Earnings per share also increased accordingly, improving from €0.30 in the previous year to €1.14.

Operating free cash flow in the Group improved by €129m or 69% year-on-year to €-59m in the first quarter of 2021. This positive development mainly resulted from the improved earnings situation, a comparatively lower increase in working capital, and lower allocations to the contractual trust agreement (CTA) in Germany.

Vehicle Systems

At €409m, sales in the Vehicle Systems division, which operates in the field of military wheeled and tracked vehicles, were down €38m or 8.4% compared to the same quarter of the previous year, as expected. This decrease was particularly due to the expiration of two major projects. By contrast, the order intake rose – mainly due to binding call-offs from existing framework agreements relating to logistical vehicles – by €42 m or 30% year-on-year to €178m, particularly reflecting new orders in the field of logistic vehicles. The order backlog is still at a high level of €9.2bn.

Due to the decline in sales, the operating result was down on the previous year’s level at €25m (previous year: €35m). The operating margin was 6.1% (previous year: 7.9%).

Weapon and Ammunition

The Weapon and Ammunition division generated sales of €221m with its weapon system and ammunition activities in the first quarter, up €54m or 32% on the figure for the previous year. After a weaker prior-year quarter, this significant increase in sales was particularly due to delivery dates for ammunition that had originally been scheduled for the second quarter of 2021 but were moved forward by the customers. In addition, the partial lifting of export restrictions at foreign subsidiaries contributed to the positive development.

At €228m, the order intake was down by €100m or 31% compared to the high figure from the previous year (€328m). In the same quarter of the previous year, the development of the order intake had been influenced by a large single order of €80m for the delivery of artillery propellant powder to an international customer. As of the end of the first quarter, the order backlog amounted to €2.8bn (previous year: €2.4bn).

The high sales level led to a significant improvement in the division’s result. The operating result increased by €33m to €18m after a loss of €-16m in the same period of the previous year. The operating margin was 8.0% (previous year: -9.3%).

Electronic Solutions

With sales of €167m, the Electronic Solutions division, which develops and produces solutions in the field of defence electronics, was down slightly by €7m or 4.0% compared to the same quarter of the previous year. The order intake was €106m or 33% lower than the comparatively high figure from the previous year, which was positively impacted by a major international order of €210m in the Air Defence unit. The order backlog was unchanged at €2.3bn.

The operating result matched the previous year’s level at €10m (previous year: €10m). The operating margin improved to 6.2% (previous year: 6.0%).

Sensors and Actuators

Sales in the Sensors and Actuators division, which does business with global automotive manufacturers with its components and control systems for reducing emissions and for thermal management, rose by 7.1% to €372m in the first quarter of 2021 (previous year: €348m). This positive development mainly resulted from increased customer call-offs as compared to the same quarter of the previous year, which was already impacted by the emerging coronavirus pandemic. The sales potential from recently concluded firm agreements for customer projects and from framework agreements (booked business) amounted to €656 m in the first quarter of 2021 and was thus considerably higher than the previous year’s level (€471m). 56% of this was attributable to new project business, while 44% related to extensions and increases in the volume of existing customer projects.

The division’s operating result improved by €18m year-on-year to €28m in the first three months of 2021 (previous year: €9m). This significant increase is attributable to the rise in sales as well as to the measures introduced to reduce costs in the wake of the coronavirus pandemic. The operating margin rose to 7.5% (previous year: 2.7%).

Materials and Trade

The Materials and Trade division, which supplies plain bearings and structural components and operates global aftermarket business with automotive components, increased its sales to €160m in the first quarter of 2021. It thus exceeded the previous year’s level by €20m or 14% (previous year: €140m). This positive sales development was largely driven by higher sales volumes in the Bearings and Aftermarket business units. In the first quarter of 2021, the division gained nominations for customer projects (booked business) with a sales volume of €173m. This corresponds to a year-on-year increase of €36m or 26% (previous year: €137m). The share of booked business attributable to new customer projects came to 96%.

The operating result of the Materials and Trade division doubled year-on-year to €14m in the first quarter of 2021 (previous year: €7m). In the Bearings and Aftermarket business units, the sales increases combined with continued strict cost management resulted in a positive development of the earnings situation. In the Castings business unit, the earnings contributions of the joint ventures KS HUAYU AluTech Group and HASCO KSPG Nonferrous Components (Shanghai) Co. Ltd., which are accounted for using the equity method, improved as against the previous year.

The division’s operating margin rose to 8.8% (previous year: 4.9%).

Pistons (non-core business)

Sales in the Pistons non-core business decreased by around €10m or 6.4% year-on-year to €140m in the first quarter of 2021 (previous year: €149m), particularly due to currency effects. Booked business in the first quarter of 2021 almost tripled as against the same period of the previous year, amounting to €60m (previous year: €21m). 37% of this was attributable to new projects, while 67% related to project extensions and increases in the volume of existing projects.

After recording an operating loss in the previous year, this unit generated an operating result of €3m in the first three months of 2021 (previous year: €-6m). The operating margin was 1.9% (previous year: -4.1%).

Group forecast for 2021 confirmed and adjusted to new reporting structure

In view of the still relatively high level of uncertainty in the macroeconomic environment and given the situation on the procurement markets, Rheinmetall is keeping to the forecast for sales growth and the operating margin for the year as a whole that was published in March 2021.

Due to the classification of the Pistons non-core business as a discontinued operation from the second quarter of 2021 onward with the application of IFRS 5 (Non-current Assets Held for Sale and Discontinued Operations), Rheinmetall anticipates operating sales growth of between 7% and 9% (pro forma sales in 2020: €5,406m) and an operating margin of between 9% and 10% (pro forma margin in 2020: 8.4%) for fiscal 2021.

 

06 May 21. Thales reports its order intake and sales for the first quarter of 2021.

• Solid order intake: €3.4bn, up 31% on an organic basis1 (up 28% on a reported basis)
• Sales: €3.9bn, up 1.9% on an organic basis (up 0.5% on a reported basis)
• Return to growth despite on-going significant impact of the health crisis on civil aeronautics and biometrics
• All financial objectives confirmed

Thales (Euronext Paris: HO) announced today its order intake and sales for the first quarter of 2021.

“Q1 2021 sales and order intake were in line with our expectations. Order intake grew particularly strongly in the space and defence businesses. Despite the health crisis still heavily impacting civil aeronautics and biometrics, sales were already back to organic growth. This performance shows the great efforts of Thales teams, and I am grateful for their constant commitment to our customers. We confirm all our financial objectives for 2021.”  Patrice Caine, Chairman and Chief Executive Officer

Order intake

In the first quarter of 2021, order intake stood at €3,416m, up 31% compared to Q1 2020 at constant scope and exchange rates, and up 28% on a reported basis, taking into account a negative exchange rate effect of almost €60m.

During the quarter, the Group recorded four large orders worth more than €100m, representing a total amount of €622m3, compared to a single large order in the first quarter of 2020:

• Two contracts related to the supply of Rafale aircraft to Greece and France
• The new generation of the Franco-Italian SAMP/T NG ground based air defense system
• SATRIA, a telecommunications satellite aimed at reducing the digital divide in Indonesia

Orders with a unit value of less than €10m totalled €2,006m, up 4% from Q1 2020, excluding avionics and in-flight entertainment businesses.

From a geographical4 perspective, order intake was up 47% on an organic basis in mature markets and down 4% on an organic basis in emerging markets.

Order intake in the Aerospace segment was up 31% on an organic basis to €998m versus €778m in Q1 2020. This improvement was driven by the sharp increase in orders in the space business.

Order intake in the Transport segment was up 67% on an organic basis to €259m, benefitting from a catch-up in contract signatures and a favourable basis of comparison.

Order intake in the Defence & Security segment was up 57% on an organic basis to €1,513m, versus €960m in Q1 2020, with three contracts over €100m.

Order intake in the Digital Identity & Security segment was, as in every quarter, close to sales, as most businesses in this segment operate on short cycles.

Sales

Q1 2021 sales came in at €3,917m versus €3,899m in Q1 2020, up 0.5% on a reported basis and up 1.9% at constant scope and exchange rates.

From a geographical5 perspective, this growth was driven by mature markets, which recorded organic growth of 4.5%, propelled for the most part by the strong performance of the European (+6.8%) and Australian (+18.9%) markets. This performance was partially offset by the decline in emerging markets (organic growth: -5.9%)

In the Aerospace segment, sales totalled €971m, down 8.7% compared to Q1 2020 at constant scope and exchange rates. This decline was due to the 30% drop in avionics and in-flight entertainment sales, still heavily impacted by the health crisis. Space business sales recorded a sharp rebound, with organic growth of +24%, thanks in particular to the institutional orders booked in 2020.

In the Transport segment, sales came in at €344m, up 0.5% compared to Q1 2020 at constant scope and exchange rates. The decline in sales on major urban rail signalling contracts signed in 2015 and 2016 was offset by more sustained activity on mainline rail projects. Travel limitations linked to the pandemic continued to create occasional difficulties for on-site deployments.

Sales in the Defence & Security segment were €1,949m, up 12.3% from Q1 2020 at constant scope and exchange rates. Almost all product lines recorded organic growth over the quarter, including in particular surface radars, naval businesses (with contracts such as F126 in Germany, T31 in the United Kingdom and MMCM in France and the United Kingdom), network and infrastructure systems, and military cybersecurity.

Sales in the Digital Identity & Security segment totalled €636m, down 7.4% compared to Q1 2020 at constant scope and exchange rates. This decline results from a strong performance in payment cards and SIM cards in Q1 2020, as well as the ongoing impact of the health crisis on biometric solutions (passports). The decline on a reported basis (-12.5%) takes into account a 4.9 point negative exchange rate effect (€36 m).

Outlook

Q1 2021 order intake and sales are in line with expectations. In this context, the Group confirms all of its 2021 objectives, as set out below.

Assuming an economic and public health situation that does not experience any new, major disruptions, and a rapid normalisation of global supply chains for semiconductors, Thales has set the following objectives for 2021:

• As in 2019 and 2020, a book-to-bill ratio above 1;
• Sales in the range of €17.1bn to €17.9bn, taking into account the significant ongoing disruptions in civil aeronautics and the recovery of growth in other segments;
• An EBIT margin in the range of 9.5% to 10%, up 150 to 200 basis points from 2020, thanks to the full effect of the global crisis adaptation plan, ongoing Ambition 10 competitiveness initiatives and the further ramp up Gemalto-related cost synergies.

1 In this press release, “organic” means at constant scope and exchange rates.

2 Mature markets: Europe, North America, Australia, New Zealand. Emerging markets: all other countries.

3 This amount did not include the contract relating to the second generation of the Galileo constellation. The first phase of this contract, booked in the first quarter, is for an amount of just under €100m. The remaining phases, totalling around €650m, are expected to be booked by the end of 2021.

 

05 May 21. Curtiss-Wright Corporation (NYSE: CW) reports financial results for the first quarter ended March 31, 2021.

First Quarter 2021 Highlights:

• Reported results include sales of $597m, operating income of $85m, operating margin of 14.2% and diluted earnings per share (EPS) of $1.45;
• Adjusted diluted EPS of $1.51, up 18%;
• Adjusted net sales of $590m, up 2%, led by strong 8% growth in our Aerospace & Defense markets;
• Adjusted operating income of $89m, up 15%;
• Adjusted operating margin of 15.0%, up 160 basis points, principally reflecting savings generated by our prior year restructuring initiatives;
• New orders of $571m, up 3%, led by a strong 1.2x book to bill in our commercial markets;
• Reported free cash flow (FCF) up 83%; Adjusted FCF up 34%; and
• Share repurchases of approximately $12m.

Full-Year 2021 Business Outlook (compared with Adjusted full-year 2020 results):

• Increased Adjusted sales guidance to new range of 7 to 9% growth (previously 6 to 8%) and Adjusted operating income guidance to new range of 9 to 11% growth (previously 7 to 10%);
• Increased Adjusted operating margin guidance to new range of 16.6% to 16.7%, up 30 to 40 basis points compared with the prior year (previously 16.5% to 16.6%, up 20 to 30 basis points); and
• Increased Adjusted diluted EPS guidance by $0.10 to new range of $7.10 to $7.30, up 8 to 11%, mainly due to expectations for higher sales and profitability in the Defense Electronics segment and stronger profitability in the Naval & Power segment.

“We delivered a strong start to the year, which has positioned us to increase our full-year Adjusted guidance for sales, operating income, operating margin and diluted EPS,” said Lynn M. Bamford, President and CEO of Curtiss-Wright Corporation. “First quarter Adjusted diluted EPS of $1.51 exceeded expectations, as we delivered strong organic defense market sales and improved profitability in the Defense Electronics and Naval & Power segments. In addition, our solid financial performance reflects the continued execution of our cost containment efforts and savings generated by our restructuring actions, as well as investments in strategic research and development projects to drive long-term organic growth. Looking ahead to the remainder of 2021, we anticipate that our second quarter results will be in line with the first quarter, followed by a steady, sequential improvement in sales, operating margin, diluted EPS and free cash flow through the second half of the year. We continue to execute on our long-term strategy to deliver top-quartile financial performance and significant value for our shareholders. We look forward to communicating our new vision, strategy and long-term financial targets at our upcoming May 26th investor day.”

First Quarter 2021 Operating Results

• Please note that the Company’s results and guidance reflect the segment realignment announced earlier in 2021, whereby the Corporation is operating under the following three segments: Aerospace & Industrial, Defense Electronics, and Naval & Power.
• Adjusted sales of $590m, up $14m, or 2%;
• Sales to the Aerospace & Defense markets increased 8%, led by strong organic growth in aerospace and naval defense, as well as the contribution of the PacStar acquisition in ground defense, which more than offset lower commercial aerospace revenues. Commercial sales decreased 7%, principally due to reduced demand in the power and process markets, partially offset by higher general industrial sales. Please refer to the accompanying tables for an overall breakdown of sales by end market;
• Adjusted operating income was $89m, up 15%, while Adjusted operating margin increased 160 basis points to 15.0%, reflecting solid organic revenue growth and the contribution from PacStar in the Defense Electronics segment and increased profitability in the Naval & Power segment, partially offset by unfavorable overhead absorption on lower revenues in the Aerospace & Industrial segment;
• In addition, our results reflect the benefits of our 2020 company-wide restructuring initiatives, as well as higher research and development costs; and
• Non-segment expenses of $9m decreased by $3m compared to the prior year, primarily due to lower foreign currency transactional losses.

Free Cash Flow

• Reported free cash flow of ($35)m, defined as cash flow from operations less capital expenditures, increased $176m, or 83%, driven by higher cash earnings and a reduction in capital expenditures, as well as a $150m voluntary contribution made to the Company’s corporate defined benefit pension plan in the prior year period which did not recur;
• Capital expenditures decreased $10m to $9m compared to the prior year, primarily due to lower capital investments within the Naval & Power segment; and
• Adjusted free cash flow improved by $18m, or 34%, to ($35)m.

New Orders and Backlog

• New orders of $571m increased 3% compared with the prior year period, driven by solid demand for defense electronics and the contribution from our PacStar acquisition, while book to bill in our commercial markets was approximately 1.2x, led by solid demand for industrial vehicle products; and
• Backlog of $2.2bn improved slightly from December 31, 2020, principally reflecting a rebound in commercial market demand.

Share Repurchase and Dividends

• During the first quarter, the Company repurchased 105,489 shares of its common stock for approximately $12m; and
• The Company also declared a quarterly dividend of $0.17 a share, unchanged from the previous quarter.

Other Items – Business Held for Sale

• During the fourth quarter of 2020, the Company classified its German valves business (previously within its Commercial/Industrial segment) as held for sale and its results have been adjusted from comparisons between our current and prior year results, and full-year financial guidance.

First Quarter 2021 Segment Performance

Aerospace & Industrial

• Reported results include sales of $180m, operating income of $19m and operating margin of 10.6%;
• Adjusted sales of $178m, down $30m, or 15%;
• Commercial aerospace market revenue declines reflect reduced OEM sales of actuation and sensors equipment, as well as surface treatment services, due to customer-driven production slowdowns impacting several widebody platforms;
• General industrial market revenue increases were led by solid industrial vehicle demand for on- and off-highway platforms, partially offset by lower industrial automation and services revenue; and
• Adjusted operating income was $19m, down 35% from the prior year, while Adjusted operating margin decreased 330 basis points to 10.4%, primarily reflecting reduced absorption on lower commercial aerospace market sales and higher research and development costs, partially offset by the benefits of our cost containment and restructuring initiatives.

Defense Electronics

• Reported results include sales of $181m, operating income of $37m and operating margin of 20.2%;
• Adjusted sales of $182m, up $43m, or 31%;
• Higher aerospace defense market revenues were driven by increased sales of embedded computing equipment on various helicopter and Unmanned Aerial Vehicle (UAV) platforms, including the Blackhawk and Global Hawk, respectively;
• Strong ground defense market revenue growth reflected the contribution from the PacStar acquisition for tactical battlefield communications equipment; and
• Adjusted operating income was $38m, up 42% from the prior year, while Adjusted operating margin increased 170 basis points to 20.9%, reflecting higher absorption and favorable mix on strong defense electronics sales and the benefits of our cost containment initiatives, which more than offset higher research and development costs as we continue to reinvest for long-term growth.

Naval & Power

(1) Adjusted results exclude our German valves business which was classified as held for sale in the fourth quarter of 2020 impacting both periods; and first year purchase accounting costs associated with acquisitions, one-time costs associated with the relocation of our DRG business and restructuring costs in the prior year period.

• Reported results include sales of $236m, operating income of $38m and operating margin of 16.2%;
• Adjusted sales of $230m, up $2 m, or 1%;
• Strong naval defense market revenue growth reflected higher production revenues on the Virginia class submarine and CVN-81 aircraft carrier programs, as well as higher spares and service center sales;
• Reduced power & process market revenues reflect lower domestic nuclear aftermarket revenues supporting the maintenance of existing operating reactors as well as lower industrial valve revenues principally within the oil and gas market; and
• Adjusted operating income was $41m, up 21%, while Adjusted operating margin increased 300 basis points to 17.7%, driven by improved mix in naval defense related to the timing of fleet spares and service center revenues, as well as the benefits of our prior year restructuring initiatives.

New Segment / End Market Structure and Realignment:

• Beginning in the first quarter of 2021, the Corporation realigned its segments, as follows:

o The Aerospace & Industrial segment is comprised of actuation and sensors products and surface treatment services serving the defense and commercial aerospace markets, as well as electronic components and systems, industrial automation and surface treatment services serving the general industrial market;

o The Defense Electronics segment is comprised primarily of the electronics businesses serving the aerospace and defense markets; and

o The Naval & Power segment is comprised of major naval propulsion equipment serving the naval defense market, as well as process and energy solutions serving both the nuclear and process markets.

• The Corporation also realigned its end market structure, as follows:

o Aerospace & Defense markets represent approximately two-thirds of total 2021 estimated revenue, and includes all Defense market revenues (aerospace, ground, naval) and all Commercial Aerospace market revenues; and

o Commercial markets represent approximately one-third of total 2021 estimated revenue and is comprised of two major end markets: Power & Process and General Industrial.

A more detailed breakdown of the Company’s 2021 financial guidance by segment and by market, as well as all reconciliations of Reported GAAP amounts to Adjusted non-GAAP amounts can be found in the accompanying schedules. Historical financial results in the new segment structure for 2020 and 2019 periods are available in the Investor Relations section of Curtiss-Wright’s website.

 

06 May 21 Melrose AGM Trading Statement. Melrose Industries PLC (“Melrose” or the “Group”) publishes the following trading update for the four months from 1 January to 30 April 2021 (the “Period”) ahead of its Annual General Meeting taking place later today.  All numbers are calculated at constant currency.

Group and cash generation

Melrose is trading modestly ahead of expectations.

For the Melrose Group, the momentum seen in the second half of 2020 has continued into 2021, with sales in the Period being 8% higher than in the same period in 2020. Excluding Nortek Air Management, Group sales grew by 4%.

The operating margins achieved in the first quarter of the year continued to improve faster than expected and cash generation for the Group is encouraging, with Melrose being cash neutral in the first quarter, in what is traditionally a cash outflow period.

The Melrose Board is encouraged by the start to the year and expects the improvements will continue, albeit the growth rate will be impacted to a degree by the well publicised supply issues on semi-conductors in the global automotive supply chain.

Aerospace

In the Period, as expected, Aerospace continued the sales trends seen last year with defence growing and civil significantly down.  In the Period, sales were down 27% compared to the same period in 2020 and 33% on 2019.  Encouragingly, Aerospace made a modest profit in the first quarter of 2021 at a demand level that was loss making last year.  This provides strong evidence that the numerous cost saving, and improvement projects are starting to have a positive impact.  On 31 March 2021 Fokker Services BV and Fokker Techniek BV were sold for a nominal sum, in 2020 these businesses had sales of c.£140m and were approximately breakeven.

Automotive

Automotive sales in the Period were 28% up compared to the same period in 2020, and 13% below 2019.  This is consistent with the market demand recovering, but with a deferred impact on growth rates due to the impact of the semi-conductor shortage in the global automotive industry.

The Automotive margin in the first quarter was encouragingly above that achieved in the second half of last year, which is consistent with the improvement plans continuing to deliver benefits.

Powder Metallurgy

Powder Metallurgy has seen a strong recent trading performance with sales in the Period being up 35% compared to the same period in 2020 and also up 1% on 2019 with margins in the first quarter significantly higher than those achieved in the second half of last year and also higher than the same period in 2019.  Powder Metallurgy is gaining market share and improving its operations, both of which are trends expected to continue.

Nortek Air Management

Nortek Air Management continued to perform well in the first quarter of the year with sales up 28% on last year and 27% up on 2019, continuing the momentum seen in the second half of last year.

The Melrose Board is delighted to have exchanged contracts on the sale of Nortek Air Management with Madison Industries for $3.625bn, as announced on 19 April.  The completion of the sale process is proceeding as expected, following which the details will be announced for the proposed portion of the proceeds to be returned to shareholders.

Other Industrial

The Other Industrial division also continued to trade well in the Period with sales 12% up on 2020 and 12% down on 2019.  The margin achieved in the first quarter was up on the same period in 2020.

Investor Day

Melrose will be holding an Investor Day about the Automotive and Powder Metallurgy divisions on 20 May, starting at 2.15pm, to explain in more detail the improvement, growth, and exciting new technology opportunities in these businesses.

Simon Peckham, CEO of Melrose Industries PLC, said, “We are pleased with our start to the year and hopefully will see this momentum continue for the rest of the year.  We are encouraged by the significant improvements made to the GKN businesses being reflected in their financial performance.  We are confident that GKN will be as successful as previous acquisitions, a track record illustrated recently by the announced sale of Nortek Air Management.”

 

04 May 21. Mercury Systems Reports Third Quarter Fiscal 2021 Results.

Third Quarter Highlights Include:

Record revenues increased 23% over prior year

Backlog of $894m increased 16% over prior year

Physical Optics Corporation integration progressing well

Mercury Systems, Inc. (NASDAQ: MRCY, www.mrcy.com), reported operating results for the third quarter of fiscal 2021, ended April 2, 2021.

Management Comments

“The Company delivered a strong financial performance in the third quarter,” said Mark Aslett, Mercury’s President and Chief Executive Officer. “Record revenues exceeded guidance and the integration of Physical Optics Corporation is progressing well. We continue to execute on our strategy to deliver strong margins while growing the business organically and supplementing the organic growth with disciplined M&A and full integration. Our pipeline is robust with multiple opportunities of varying sizes, all in line with the core of our strategy. We believe this strategy will continue to generate significant value for our shareholders,” said Aslett.

Third Quarter Fiscal 2021 Results

Total Company third quarter fiscal 2021 revenues were $256.9 m, compared to $208.0m in the third quarter of fiscal 2020. The third quarter fiscal 2021 results included an aggregate of approximately $38.5 m of revenue attributable to the Physical Optics Corporation acquired business.

Total Company GAAP net income for the third quarter of fiscal 2021 was $15.6m, or $0.28 per share, compared to $23.6m, or $0.43 per share, for the third quarter of fiscal 2020. Adjusted earnings per share (“adjusted EPS”) was $0.64 per share for the third quarter of fiscal 2021, compared to $0.60 per share in the third quarter of fiscal 2020.

Third quarter fiscal 2021 adjusted EBITDA for the total Company was $54.8m, compared to $47.1m for the third quarter of fiscal 2020.

Cash flows from operating activities in the third quarter of fiscal 2021 were $23.2m, compared to $30.1m in the third quarter of fiscal 2020. Free cash flow, defined as cash flows from operating activities less capital expenditures for property and equipment, was $13.2m for the third quarter of fiscal 2021 and $19.2m for the third quarter of fiscal 2020.

All per share information is presented on a fully diluted basis.

Bookings and Backlog

Total bookings for the third quarter of fiscal 2021 were $210.2m, yielding a book-to-bill ratio of 0.82 for the quarter.

Mercury’s total backlog at April 2, 2021 was $893.7m, a $123.9m increase from a year ago. Of the April 2, 2021 total backlog, $545.5 m represents orders expected to be shipped within the next 12 months.

Business Outlook

This section presents our current expectations and estimates, given current visibility, on our business outlook for the current fiscal quarter and fiscal year 2021. It is possible that actual performance will differ materially from the estimates given, either on the upside or on the downside. Investors should consider all of the risks with respect to these estimates, including those listed in the Safe Harbor Statement below and in the Third Quarter Fiscal 2021 Earnings Presentation and in our periodic filings with the U.S. Securities and Exchange Commission, and make themselves aware of how these risks may impact our actual performance. Effective as of July 1, 2019, the Company’s fiscal year has changed to the 52-week or 53-week period ending on the Friday closest to the last day in June. All references in this press release to the third quarter of fiscal 2021 are to the quarter ending April 2, 2021 and to full fiscal 2021 are to the 52-week period ending July 2, 2021.

For the fourth quarter of fiscal 2021, revenues are forecasted to be in the range of $236.5m to $246.5m. GAAP net income for the fourth quarter is expected to be approximately $19.5m to $20.9m, or $0.35 to $0.38 per share, assuming no incremental restructuring, acquisition, other non-operating adjustments, non-recurring financing in the period, an effective tax rate, excluding discrete items, of approximately 26% and approximately 55.7 m weighted average diluted shares outstanding. Adjusted EBITDA for the fourth quarter of fiscal 2021 is expected to be in the range of $58.1m to $60.0m. Adjusted EPS is expected to be in the range of $0.66 to $0.69 per share.

For the full fiscal year 2021, revenues are forecasted to be in the range of $910.0m to $920.0m, and GAAP net income of $63.5m to $64.9m, or $1.14 to $1.17 per share, assuming no incremental restructuring, acquisition, other non-operating adjustments, non-recurring financing in the period, an effective tax rate, excluding discrete items, of approximately 26% for the remainder of the year and approximately 55.5m weighted average diluted shares outstanding. Adjusted EBITDA for the full fiscal year is expected to be approximately $201.0m to $203.0m, and adjusted EPS for the full fiscal year is expected to be approximately $2.35 to $2.37 per share.

Recent Highlights

March – Mercury announced it was selected by NASA’s Jet Propulsion Laboratory (JPL) to provide solid-state data recorders (SSDRs) for NASA’s Earth Surface Mineral Dust Source Investigation (EMIT) science mission. The Earth Imaging Spectrometer instrument containing Mercury’s SSDRs is scheduled for launch to the International Space Station (ISS) in 2022.

February – Mercury announced the ARES3100 Advanced Radar Environment Simulator (ARES), ideal for testing demanding radar applications ranging from anechoic chamber and open-air range (OAR) to laboratory-based production testing and comprehensive radar performance evaluation.

February – Mercury announced that President and CEO Mark Aslett was a recipient of Executive Mosaic’s government contracting (GovCon) 2021 Wash100 Award, a prestigious award recognizing the most influential leaders in the GovCon sector.

February – Mercury announced it had been named one of the Boston Business Journal (BBJ) Middle Market Leaders, a ranking of the 50 fastest- growing companies in Massachusetts. Mercury ranked 10th based on its 2017 to 2019 revenue growth and joins other rapidly growing Massachusetts-based companies on the exclusive list including Abiomed, Forrester Research and Rapid7.

February – Mercury announced the achievement of a significant milestone with the delivery of the 1,000th ethernet routing device (ERD) to Boeing. The ERD is a rugged line-replaceable unit (LRU) designed for aviation applications where extreme temperature, shock and vibration are prevalent. It provides key networking capabilities to the AH-64E Apache helicopter.

February – Mercury announced the latest model in its secure server product line, the new RES Trust XR6 rackmount server with BuiltSECURE™ technology. Ruggedized for harsh environments, the secure server features trusted performance and built-in data integrity protection for mission-critical C4ISR, electronic warfare (EW) and artificial intelligence (AI) applications.

January – Mercury announced that Chief Technology Officer Dr. Bill Conley was appointed to a six-year term on the Board of Directors of the National Defense Industrial Association (NDIA) Central Georgia Chapter. The defense trade organization, based in Arlington, Va., drives strategic dialogue in national security by identifying key issues and leveraging the knowledge and experience of its military, government, industry and academic members.

January – Mercury announced that three of its manufacturing locations received IPC-1791 certifications, earning a place on the IPC Qualified Manufacturer’s Listing (QML) as a Trusted Supplier. Mercury is the only OEM in the U.S. to have multiple sites certified to IPC-1791 standards with two in Hudson, N.H. and one in Phoenix, Ariz.

 

04 May 21. ParkOhio Announces First Quarter 2021 Results.

• Revenue of $360m
• GAAP EPS of $0.45; Adjusted EPS of $0.53
• Operating Cash Flows of $10m
• Increased Liquidity to $264m at March 31, 2021
• Completed the Acquisition of NYK Component Solutions

Park-Ohio Holdings Corp. (NASDAQ: PKOH) today announced its results for the first quarter of 2021.

FIRST QUARTER CONSOLIDATED RESULTS

Net sales were $359.6m in the first quarter of 2021 compared to net sales of $366.3m in the first quarter of 2020. Net income attributable to ParkOhio common shareholders was $5.5m, or $0.45 per diluted share, in the first quarter of 2021, compared to $1.2m, or $0.10 per diluted share, in the first quarter of 2020. Results in 2020 included an effective income tax rate of 81% driven by deductions and foreign tax credits that could not be claimed in 2020 or carried forward. The impact of these items on our first quarter 2020 income tax expense was an increase of $3.7m, or $0.30 per diluted share. On an adjusted basis, net income attributable to ParkOhio common shareholders was $0.53 per diluted share in the 2021 first quarter compared to $0.13 per diluted share in the 2020 first quarter. Please refer to the table that follows for a reconciliation of net income to adjusted earnings.

Matthew V. Crawford, Chairman, Chief Executive Officer and President, stated, “Our business rebounded strongly during the first quarter returning to pre-pandemic levels.  Robust demand in most markets accelerated throughout the quarter, and while the COVID-19 pandemic continues to provide an uncertain backdrop to the economy, we anticipate improvement throughout the year.  Additionally, we are pleased with the substantial reduction in debt compared to a year ago.  Finally, we are excited to have completed the strategic acquisition of NYK for our Apollo Aerospace division of Supply Technologies.”

We generated $9.9m of operating cash flows and $3.3m of free cash flow in the quarter. At March 31, 2021, our liquidity was $264.4m, which included cash on-hand of $58.9m and $205.5m of unused borrowing capacity under our various banking arrangements.

QUARTERLY CASH DIVIDEND

The Company’s Board of Directors declared a quarterly cash dividend of $0.125 per share on the common stock outstanding, to be paid on May 21, 2021, to shareholders of record as of the close of business on May 7, 2021.

FIRST QUARTER SEGMENT RESULTS

In Supply Technologies, net sales were $157.7m, up 12% year-over-year driven by strong customer demand in the majority of our end markets, including power sports, heavy-duty truck, medical, automotive and defense. Our average daily sales in our supply chain management business increased 14% year-over-year and 11% sequentially despite continued slow recovery in the commercial aerospace end market. Operating income in this segment increased by $3.0m in the first quarter of 2021 compared to the first quarter a year ago, and operating margins increased by 120 basis points, both driven by the higher sales levels and the favorable impact of cost-reduction actions implemented in 2020, despite higher levels of premium freight caused by global supply chain constraints. We expect the strong overall customer demand to continue throughout 2021 as the majority of our end markets fully recover from the global pandemic.

In Assembly Components, net sales were $126.0m compared to $128.2m the same quarter a year ago. While sales levels continue their steady recovery from pandemic lows of $55 m in the second quarter of 2020, they were negatively impacted in the first quarter of 2021 by temporary customer plant shut-downs caused by weather-related issues and demand volatility caused by semiconductor chip shortages affecting certain automotive platforms. Segment operating income was $6.4 m in the first quarter of 2021, up slightly compared to the first quarter a year ago, and operating margin increased by 20 basis points in spite of the lower sales levels in the 2021 quarter. The improvement in profitability in the three months ended March 31, 2021 compared to the same quarter a year ago was driven by benefits of cost reduction actions, which more than offset higher manufacturing costs caused by demand volatility and one-time charges of $0.6m to close and consolidate certain facilities. Also, we continue to launch several new products that we expect will positively impact sales in future quarters, primarily in our fuel and extruded products businesses. The global semiconductor chip shortage, which caused many of our customers’ plants to shut-down in the first quarter, is expected to continue. Although it is difficult to project the full year impact at this time, we estimate that the sales impact in the second quarter will be approximately $10m based on current customer shut-down schedules.

In Engineered Products, net sales were $75.9m compared to $97.3m in last year’s first quarter and $86.0m in the fourth quarter of 2020. The first quarter results in this segment continued to be affected by the slow recovery in our key end markets, most notably in our forged and machined products group, which supplies products to the aerospace, oil and gas, steel and rail end markets. We incurred an operating loss of $1.3m in the 2021 quarter, compared to operating income of $3.8m in last year’s first quarter, which was driven by the lower sales levels and one-time charges of $0.7m to consolidate certain facilities. We expect volumes to improve throughout the remainder of 2021 as markets we serve recover from pandemic lows. In our industrial equipment business, order activity continues to strengthen. In the first quarter, new orders increased 38% over fourth quarter 2020 levels.

ACQUISITION OF NYK COMPONENT SOLUTIONS LIMITED

On April 1, 2021, the Company acquired NYK Component Solutions Limited (“NYK”). NYK, which will be included in our Supply Technologies segment, is headquartered in Southampton, United Kingdom and is a leading distributor of circular connectors and accessories for use in aerospace, defense, and other industrial applications. NYK will provide complementary product lines and new customer opportunities throughout Europe and North America. We expect annual sales from NYK to exceed $10m and the acquisition to be immediately accretive to earnings. (Source: BUSINESS WIRE)

 

04 May 21. Eaton Reports Strong First Quarter 2021 Results, Raises 2021 Outlook.

• Eaton Reports First Quarter Earnings Per Share of $1.14, First Quarter Record Adjusted Earnings Per Share of $1.44, Up 15 Percent Over the First Quarter of 2020
• First Quarter Operating Cash Flow of $260 M; Adjusted Operating Cash Flow of $460m, Up 42 Percent Over the First Quarter of 2020
• First Quarter Segment Margin of 17.7%, 190 Basis Points Favorable to the First Quarter of 2020 and a First Quarter Record
• Raising Adjusted Earnings Per Share Guidance for 2021 to $6.10 at the Midpoint, Up 24 Percent Over 2020

Power management company Eaton Corporation plc (NYSE:ETN) today announced that earnings per share were $1.14 for the first quarter of 2021. Excluding charges of $0.18 per share related to intangible amortization, $0.09 per share related to acquisitions and divestitures, and $0.03 per share related to a multi-year restructuring program, adjusted earnings per share were a first quarter record of $1.44, up 15 percent over the first quarter of 2020.

Sales in the first quarter of 2021 were $4.7bn, down 2 percent from the first quarter of 2020. The divestiture of the Lighting business reduced sales by 5½ percent, which was partially offset by positive currency translation of 2 percent, 1 percent growth from acquisitions, and organic growth of ½ percent.

Craig Arnold, Eaton chairman and chief executive officer, said, “Our first quarter was stronger than expected, with organic sales well above the high end of our guidance range, segment margin at record levels, and strong cash flow. We are pleased with how rapidly our businesses are recovering towards pre-pandemic levels.”

First quarter segment margins were 17.7 percent, up 190 basis points over the first quarter of 2020, above the high end of our guidance range, and a first quarter record. This was the result of strong execution and ongoing improvements in the company’s cost structure from the multi-year restructuring program announced in the second quarter of 2020.

Operating cash flow in the first quarter of 2021 was $260m. Excluding $200m of contributions to Eaton’s U.S. qualified pension plan, adjusted operating cash flow was $460m and adjusted free cash flow was $341m, representing a 62 percent increase over the first quarter of 2020.

During the quarter, the company closed the acquisitions of Tripp Lite and Green Motion, and the acquisition of a 50 percent stake in HuanYu High Tech, adding new products and growth opportunities for the Electrical segments.

The Hydraulics sale to Danfoss is expected to close in the second quarter and the acquisition of Cobham Mission Systems remains on track to close the beginning of the fourth quarter of 2021.

“Factoring in the earlier than expected closing of the Tripp Lite acquisition and our strong first quarter performance, we now expect 2021 adjusted earnings per share to be between $5.90 and $6.30, up 24 percent at the midpoint over 2020,” said Arnold. “We anticipate adjusted earnings per share for the second quarter of 2021 to be between $1.45 and $1.55.”

Business Segment Results

Sales for the Electrical Americas segment were $1.6bn, down 9 percent from the first quarter of 2020, driven by a 14 percent reduction from the divestiture of the Lighting business. Organic sales were up 2 percent, the acquisitions of Power Distribution, Inc. and Tripp Lite added 2 percent, and positive currency translation added 1 percent. Operating profits were $332m, up 8 percent from the first quarter of 2020. Operating margins were 20.5 percent, up 330 basis points over the first quarter of 2020.

The twelve-month rolling average of orders in the first quarter was up 1 percent, with particular strength in data center and residential markets. Orders increased 11 percent over the first quarter of 2020. Backlog at the end of March remained strong, up 23 percent over March 2020.

Sales for the Electrical Global segment were $1.3bn, up 10 percent over the first quarter of 2020. Organic sales were up 5 percent and positive currency translation added 5 percent. Operating profits were $213m, up 28 percent over the first quarter of 2020. Operating margins were 17.0 percent, up 250 basis points over the first quarter of 2020.

The twelve-month rolling average of orders in the first quarter was down 5 percent, driven by declines in oil and gas markets partially offset by strength in data center, residential and utility markets. During the first quarter, the business experienced strong order growth of 7 percent over the first quarter of 2020. The March backlog grew 17 percent over March 2020.

Hydraulics segment sales were $561m, up 11 percent over the first quarter of 2020, driven by a 9 percent increase in organic sales and positive currency translation of 2 percent. Operating profits were $84m, up 53 percent over the first quarter of 2020. Operating margins were 15.0 percent, up 420 basis points over the first quarter of 2020.

Aerospace segment sales were $519m, down 24 percent from the first quarter of 2020, driven by the continued downturn in commercial aviation. Organic sales were down 26 percent, partially offset by positive currency translation of 2 percent. Operating profits were $96m, down 35 percent from the first quarter of 2020. Operating margins in the quarter were 18.5 percent, representing solid decremental performance in light of the continued impact of the pandemic on sales.

The twelve-month rolling average of orders in the first quarter was down 36 percent, driven by the downturn in commercial markets. Backlog at the end of March was down 11 percent compared to March 2020.

The Vehicle segment posted sales of $654m, up 9 percent over the first quarter of 2020, driven entirely by organic sales. Operating profits were $113m, up 40 percent over the first quarter of 2020. Operating margins were 17.3 percent, up 380 basis points over the first quarter of 2020.

eMobility segment sales were $83m, up 15 percent over the first quarter of 2020, driven by organic sales growth of 13 percent and positive currency translation of 2 percent. The segment recorded an operating loss of $7m reflecting continued investment in research and development for new programs. (Source: BUSINESS WIRE)

 

04 May 21. Leidos Holdings, Inc. Reports First Quarter Fiscal Year 2021 Results.

– Revenues: $3.32bn, year-over-year growth of 14.7%

– Diluted Earnings per Share: $1.42; Non-GAAP Diluted Earnings per Share: $1.73

– Net Bookings: $3.8bn (book-to-bill ratio of 1.2)

– Cash Flows from Operations: $239m

Leidos Holdings, Inc. (NYSE: LDOS), a FORTUNE 500® science and technology leader, today reported financial results for the first quarter of fiscal year 2021.

Roger Krone, Leidos Chairman and Chief Executive Officer, commented: “First quarter results reflect the perseverance, focus and tremendous execution of our employees and business partners. New quarterly record levels of revenue, non-GAAP EPS and backlog were achieved, and significant organic growth was delivered across all business segments. This early momentum favorably positions Leidos to deliver on our full year financial commitments.”

Summary Results

Revenues for the quarter were $3.32bn, compared to $2.89bn in the prior year quarter, reflecting a 14.7% increase. Excluding our revenue growth from our acquisitions of $168m for Dynetics, Inc. (“Dynetics”), L3Harris Technologies’ security detection and automation businesses (the “SD&A Businesses”) and 1901 Group, LLC (“1901 Group”), organic revenue increased by $258m or 8.9%. This increase was primarily attributable to program wins and a net increase in volumes on certain programs.

Operating income for the quarter was $308m, compared to $192m in the prior year quarter, reflecting a 60.4% increase. Operating income margin increased to 9.3% from 6.6% in the prior year quarter. Non-GAAP operating income margin for the quarter was 11.1%, compared to 8.5% in the prior year quarter, primarily attributable to a net increase in higher margin program volumes, program wins and a $26m net benefit from an adjustment to legal reserves related to the Mission Support Alliance joint venture.

Diluted earnings per share (“EPS”) attributable to Leidos common stockholders for the quarter was $1.42, compared to $0.80 in the prior year quarter. Non-GAAP diluted EPS for the quarter was $1.73, compared to $1.19 in the prior year quarter. The weighted average diluted share count for the quarter was 144m for both the current and prior year quarters.

Defense Solutions

Defense Solutions revenues for the quarter of $1,958m increased by $253m, or 14.8%, compared to the prior year quarter. The increase in revenues was primarily attributable to program wins, a net increase in volumes on certain programs and a benefit in exchange rate movements. The acquisition of Dynetics contributed incremental revenues of $83m in the current quarter, which represents an additional month of revenues as compared to the prior year quarter and our acquisition of the 1901 Group contributed $13m of revenues. The increases in revenues were partially offset by the completion of certain contracts.

Defense Solutions operating income margin for the quarter was 7.8%, compared to 5.6% in the prior year quarter. On a non-GAAP basis, operating income margin for the quarter was 9.2%, compared to 6.8% in the prior year quarter, primarily attributable to program wins, a net increase in program volumes on higher margin contracts and lower indirect expenditures.

Civil

Civil revenues for the quarter of $766m increased by $112 m, or 17.1%, compared to the prior year quarter. The revenue increase was primarily attributable to $72m of revenues related to the acquisition of the SD&A Businesses in the second quarter of fiscal 2020 and a net increase in program volumes.

Civil operating income margin for the quarter was 9.7%, compared to 9.0% in the prior year quarter. On a non-GAAP basis, operating income margin for the quarter was 12.0%, compared to 10.9% in the prior year quarter, primarily attributable to a $26m net benefit from an adjustment to legal reserves related to the Mission Support Alliance joint venture.

Health

Health revenues for the quarter of $591m increased by $61m, or 11.5%, compared to the prior year quarter. The revenue increase was primarily attributable to a net increase in volumes on certain programs and program wins, partially offset by the completion of certain contracts.

Health operating income margin for the quarter was 17.3%, compared to 13.8% in the prior year quarter. On a non-GAAP basis, operating income margin for the quarter was 18.6%, compared to 15.5% in the prior year quarter, primarily attributable to a net increase in higher margin program volumes.

Cash Flow Summary

Net cash provided by operating activities for the quarter was $239m compared to $372m in the prior year quarter. The decrease in cash inflows was primarily due to the lower customer advance payments, lower sale of accounts receivable and the timing of vendor payments.

Net cash used in investing activities for the quarter was $244m compared to $1,685m in the prior year quarter. The decrease in cash outflows was primarily due to net cash paid related to the acquisition of 1901 Group in the current year quarter compared to net cash paid related to the acquisition of Dynetics in the prior year quarter.

Net cash used in financing activities for the quarter was $148m compared to net cash provided by financing activities of $1,161m in the prior year quarter. The decrease in cash inflows was primarily due to proceeds received related to the issuance of the Bridge Facility in the prior year quarter, $100m of open market stock repurchases in the current year quarter and the timing of quarterly principal payments, partially offset by capital contributions to Hanford Mission Integration Solutions from non-controlling interests.

As of April 2, 2021, we had $377m in cash and cash equivalents and $4.8bn of debt.

New Business Awards

Net bookings totaled $3.8bn in the quarter, representing a book-to-bill ratio of 1.2.

Notable recent awards received include:

• Military and Family Life Counseling Support Services: The Company was awarded a new prime contract to provide non-medical counseling to military service members and their families through the Military and Family Life Counseling (MFLC) program. Under the contract, Leidos will provide face-to-face non-medical counseling, consultation and outreach services at approximately 100 U.S. military installations or nearby civilian communities. Leidos will also provide management and logistical support for counselors to provide services in accordance with established performance measures. The award has a total estimated value of approximately $1 bn and includes a 12-month base period with four 12-month options and two 12-month award term incentive periods.
• U.S. Customs and Border Protection Multi-Energy Portal Systems Support: The Company was awarded a prime contract by U.S. Customs and Border Protection (CBP) to provide Multi-Energy Portal (MEP) systems for non-intrusive inspection of commercial vehicles at land and sea ports of entry. Under the contract, Leidos will integrate, deploy and train CBP staff to use its VACIS® MEP with low-energy backscatter and high-energy transmission cargo inspection system. The multiple-award indefinite delivery/indefinite quantity contract has a total value of $480m and includes a five-year base period of performance and options up to 10 years, if exercised.
• Naval Array Technical Support Center Services: The Company was awarded a prime contract by the Naval Undersea Warfare Center – Newport Division to provide engineering, technical and management services for the Naval Array Technical Support Center. Under the contract, Leidos will perform tasks for the U.S. Navy’s Sensors and SONAR Systems Department. Leidos will be responsible for production engineering, technical and logistics support of the Navy and foreign governments’ towed array assets. The single-award, indefinite delivery/indefinite quantity, cost-plus-fixed-fee and firm-fixed-price contract has a total estimated value of $149.2m.
• U.S. Intelligence Community: The Company was awarded contracts valued at $822m, if all options are exercised, by U.S. national security and intelligence clients. Though the specific nature of these contracts is classified, they all encompass mission-critical services that help to counter global threats and strengthen national security.

Backlog at the end of the quarter was $32.6bn, of which $7.0bn was funded.

Forward Guidance

As a result of the Company’s year-to-date performance and updated expectations, the Company is revising its fiscal year 2021 guidance as follows:

• Revenues of $13.7bn to $14.1bn, remained unchanged from previous guidance;
• Adjusted EBITDA margins of 10.5% to 10.7%, up from 10.3% to 10.5%;
• Non-GAAP diluted EPS of $6.35 to $6.65, up from $6.15 to $6.45; and
• Cash flows provided by operating activities at or above $875m, up from previous guidance of $850m.

Non-GAAP diluted EPS excludes amortization of acquired intangible assets, acquisition, integration and restructuring costs and other tax adjustments. For additional information regarding non-GAAP diluted EPS and Leidos’ other non-GAAP financial measures, see the related explanations and reconciliations to GAAP measures included elsewhere in this release.

The Company does not provide a reconciliation of forward-looking adjusted EBITDA margins (non-GAAP) or non-GAAP diluted EPS to GAAP net income, due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliation. Because certain deductions for non-GAAP exclusions used to calculate projected net income may vary significantly based on actual events, the Company is not able to forecast on a GAAP basis with reasonable certainty all deductions needed in order to provide a GAAP calculation of projected net income at this time. The amounts of these deductions may be material and, therefore, could result in projected GAAP net income and diluted EPS being materially less than projected adjusted EBITDA margins (non-GAAP) and non-GAAP diluted EPS.

(Source: PR Newswire)

 

04 May 21. AMETEK Announces First Quarter Results and Raises 2021 Guidance. AMETEK, Inc. (NYSE: AME) today announced its financial results for the first quarter ended March 31, 2021.

AMETEK’s first quarter 2021 sales were $1.22bn, a 1% increase over the first quarter of 2020, with organic sales growth of 1%. Operating income increased 6% to $293.3m, and operating margins were up 110 basis points to 24.1%, both versus the prior year’s adjusted results.

On a GAAP basis, first quarter earnings per diluted share were $0.94. Adjusted earnings were $1.07 per diluted share, up 5% versus the prior year’s adjusted results. Adjusted earnings adds back non-cash, after-tax, acquisition-related intangible amortization of $0.13 per diluted share. A reconciliation of reported GAAP results to adjusted results is included in the financial tables accompanying this release and on the AMETEK website.

“AMETEK performed exceptionally well in the first quarter,” commented David A. Zapico, AMETEK Chairman and Chief Executive Officer. “We were pleased with the return to organic sales growth earlier than anticipated, while order momentum remains very strong with a record level of orders and 9% organic orders growth in the quarter. Additionally, our businesses delivered outstanding operating performance with robust margin expansion.”

“We continue to generate strong cash flow with operating cash flow up 5% in the quarter and free cash flow conversion of 122% of net income. This excellent cash flow generation is being used to support an active acquisition environment. Thus far in 2021, we have deployed $1.85bn on five strategic acquisitions. We remain well positioned with a pipeline of attractive acquisition opportunities and strong balance sheet capacity to support our continued growth,” noted Mr. Zapico.

Electronic Instruments Group (EIG)

First quarter EIG sales were $790.9m, up 2% compared to the first quarter of 2020. EIG’s operating income in the quarter was up 7% to $206.9m, and operating margins were up 110 basis points to 26.2%, versus the prior year’s adjusted results.

“EIG delivered strong results in the first quarter with solid sales growth and outstanding operating performance,” noted Mr. Zapico. “Sales were stronger than expected in the quarter as we continue to see improvements across our key end markets, in particular across our Process businesses.”

Electromechanical Group (EMG)

EMG sales in the first quarter were $424.8m, down 1% compared to last year’s first quarter. Operating income for EMG was up 8% to a record $105.0 m, and operating margins were up 190 basis points to a record 24.7%, versus the prior year’s adjusted results.

“EMG also had an excellent first quarter with solid organic sales growth offset by the divestiture of Reading Alloys,” commented Mr. Zapico. “EMG’s automation businesses are benefitting from solid demand for their precision motion control solutions, while EMG’s operational initiatives delivered record operating profit and operating margins in the quarter.”

2021 Outlook

“The strength of the AMETEK Growth Model was reflected in our results this quarter and in our revised outlook for the balance of the year. Our differentiated businesses, diverse and balanced end market exposures, exceptional operating capability, robust cash flow generation and proven ability to deploy capital on value enhancing acquisitions, has positioned AMETEK extremely well for strong growth in 2021 and beyond,” continued Mr. Zapico.

“Given our first quarter results and recent acquisition activity we are increasing our guidance for the year. For 2021, we now expect overall sales to be up high teens on a percentage basis compared to the prior year, with organic sales up high single digits. Adjusted earnings per diluted share are expected to be in the range of $4.48 to $4.56, an increase of 13% to 15% over the comparable basis for 2020. This is an increase from our previous adjusted earnings guidance range of $4.18 to $4.30 per diluted share,” he added.

“Overall sales in the second quarter are expected to be up in the low 30% range versus the second quarter of 2020. We anticipate adjusted earnings per diluted share will be in the range of $1.08 to $1.10, up 29% to 31% versus last year’s second quarter. Our full year and second quarter guidance includes all five recently completed acquisitions,” concluded Mr. Zapico. (Source: PR Newswire)

 

04 May 21. Fralock Holdings Acquires Ceramic Tech Inc.. The company’s latest strategic acquisition expands its customized ceramic solutions. Fralock Holdings, LLC, (an Arsenal Capital Portfolio Company) a leading developer and manufacturer of engineered solutions for critical applications, today announced the acquisition of Ceramic Tech Incorporated (CTI), an end-to-end ceramic solutions provider whose capabilities include specialized formulations, pre-fired machining, Sintering, pressing and grinding for the world’s largest Original Equipment Manufacturers (OEM). Included in the deal was Stratamet Advanced Materials (SAM), an independent manufacturer of high purity, semiconductor grade ceramic materials.

Founded in 1989, CTI has built a reputation for designing and building fine quality products and superior workmanship. Their stellar reputation made the combined companies an ideal acquisition choice for Fralock Holdings.

“CTI is renowned in the semiconductor industry for its rapid prototyping and large format capabilities,” said Marc Haugen, CEO, Fralock Holdings. “The technical know-how and strong market position of CTI gives us room to explore new formulations in both oxidized and non-oxidized ceramics. Our acquisition of Oasis Materials earlier this year launched us into technically advanced active metalized ceramics; this latest acquisition gives us differentiated technical ceramics capability, from raw powder through precision machining, including very large format structural ceramics.”

Fralock Holdings’ applications are used in a variety of ways that impact our lives, including equipment used to manufacture semiconductors, medical treatment, imaging and patient monitoring, defense applications, satellite and spacecraft components. This new acquisition will broaden the company’s ceramic product options and enable all of the company’s end markets to benefit from the products created by CTI.

“We have spent more than 30 years developing relationships and strategic partnerships with OEM’s in Silicon Valley and beyond,” said Kanu Gandhi, President, Ceramic Tech Incorporated. “We are thrilled to become a part of the growing Fralock Holdings platform of companies, and look forward to working closely with Marc and his team to continue to nurture these relationships and create new ones.”

The acquisition adds over 30 new associates, building upon Fralock Holdings’ deep technical expertise and bench strength.

About Fralock Holdings, LLC

Established in 1967, Fralock Holdings (an Arsenal Capital Portfolio Company) is a design, engineering and manufacturing company that develops high-performance solutions for Fortune 500 corporations in aerospace, defense, medical, life science, semiconductor technology and other high reliability markets. Its family of companies include Fralock, Career Technologies USA, Mapson Engineering, Oasis Materials and Ceramic Tech Incorporated. Headquartered in Valencia, California, Fralock employs over 500 associates in offices throughout California. (Source: PR Newswire)

 

04 May 21. AMETEK Acquires NSI-MI Technologies – Strengthens AMETEK’s Test and Measurement Platform. AMETEK, Inc. (NYSE: AME) today announced that it has acquired NSI-MI Technologies, a leading provider of radio frequency and microwave test and measurement solutions and services. NSI-MI was acquired for $230m and has annual sales of approximately $90m.

NSI-MI’s expertise in advanced radio frequency and microwave technologies allows them to provide complete test and measurement systems for niche applications across the aerospace, defense, automotive, wireless communications, and research markets. The company has a diverse portfolio of testing instrumentation, components and software, while also providing customers with turnkey anechoic and simulation chambers, and a broad set of aftermarket services.

“We are pleased to welcome NSI-MI to AMETEK,” comments David A. Zapico, AMETEK Chairman and Chief Executive Officer. “NSI-MI is an outstanding acquisition and nicely complements our existing Electromagnetic Compatibility test and measurement businesses. NSI-MI’s test and measurement solutions are uniquely positioned to support the continued development of advanced RF and microwave technologies for critical applications in wireless communications, satellite systems, autonomous vehicles, and defense systems.”

NSI-MI is headquartered in Suwanee, Georgia with additional operations in Torrance, California and Sheffield, U.K. NSI-MI joins AMETEK as part of its Electronic Instruments Group (EIG) – a leader in advanced analytical, monitoring, testing, calibrating and display instrumentation. (Source: PR Newswire)

 

04 May 21. CSIRO backs new space start-up. The national science agency has delivered satellite communications technology to a newly launched Australian space start-up.

New Australian space start-up Quasar Satellite Technologies has officially launched, supported by technology developed by the CSIRO, which is expected to bolster communications capability between ground stations and deployed satellites.

Quasar has secured $12m in funding to support its operations, along with technology and industry expertise from CSIRO, Main Sequence, the Office of the NSW Chief Scientist & Engineer, and Australian companies Vocus, Saber Astronautics, Fleet Space Technologies, and Clearbox Systems.

Quasar aims to capitalise on the US$130bn ($167.5bn) satellite ground communications market, leveraging technology developed by the CSIRO for radio telescopes like the ASKAP telescope in Western Australia.

CSIRO chief executive Dr Larry Marshall said the partnership would support jobs growth in the space industry.

“CSIRO has been a leader in radio astronomy and spacecraft communications for more than 60 years, from supporting the moon landing in 1969 to inventing and delivering the phased-array feeds in Australia’s newest radio telescope, ASKAP in Western Australia,” Dr Marshall said.

“CSIRO’s technology breakthrough enabled the world to connect without wires using fast Wi-Fi, and now our technology will help connect satellites using our breakthrough phased array technology.”

According to Quasar CEO Phil Ridley, the technology would enable new satellite-based business models and opportunities previously hindered by legacy ground station technology.

“Space is the highway of the stars, but current ground station technology is the equivalent of one-lane on-ramps,” Ridley said.

“By making it possible to communicate with hundreds of satellites simultaneously, we’ll be able to ensure the thousands of satellites launching over the next decade have a way to call home efficiently.”

Dr Ilana Feain, CSIRO commercialisation specialist and a founding director of Quasar, noted the benefits of cross-industry support for the newly launched start-up.

“CSIRO’s phased array technology revolutionised radio astronomy by enabling ASKAP to see enormous portions of the sky at once – about 30 times the area that conventional telescopes could see,” Dr Feain said.

“I’m excited to see the next evolution of this technology empower satellite businesses and their downstream industries.”

Quasar is expected to offer the technology ‘as a service’, enabling commercial and public sector partners to access data from satellites in low, medium and geostationary orbit.

Quasar is building the technology using an Australia-based team with expertise and research support from CSIRO.  (Source: Space Connect)

 

04 May 21. Avon Rubber: a potential buying opportunity ahead of its half year results. The shares have yet to recover after the group unveiled delays to some of its contracts in December.

• The protective equipment maker is guiding that revenue for the six months to 31 March will rise by two-fifths to $122m
• The contract issues are on their way to being resolved and new orders are flowing in

Protective equipment specialist Avon Rubber (AVON) was a standout player in the UK-listed defence sector in 2020. Its shares charged ahead while the likes of BAE Systems (BA) were weighed down by post-pandemic defence spending concerns.

But after reaching an all-time high of 4,625p in early December, Avon Rubber’s shares nosedived just over two weeks later after it announced delays to two of its US defence contracts, and revealed that a competitor was contesting the tender process of another.

The group has released two positive trading updates since then, although investor confidence has yet to fully recover – the shares remain some way off their peak at 3,328p.

In the most recent update from early April, Avon Rubber said that it had seen “ongoing positive momentum” in its second quarter, and on the back of double-digit growth in both its military and first responder businesses, the group guided that revenue for the six months to 31 March would jump by two-fifths year-on-year to $122m (£88m). This includes a $20m contribution from Team Wendy, the US helmet specialist acquired for $130m back in November. The full set of half year numbers are due to be unveiled on 25 May.

Despite the aforementioned contract setbacks, Avon Rubber has continued to secure more orders, including $38m of initial orders for respiratory protection systems under its agreement with the NATO Support and Procurement Agency. Based on its $155m order book and expected order intake in the second half, the group is confident that it can meet full year expectations. Broker Panmure Gordon currently envisages an adjusted pre-tax profit of $47m, up from $36m a year earlier.

Regarding the contract issues, Avon Rubber is finalising the revised designs of its small arms protective inserts for the US Defense Logistics Agency, and is on schedule to complete “first article testing” – the process that examines whether goods meet certain specifications prior to production – in the second half of the year. If all goes well, deliveries are expected to begin in the second half of its 2022 financial year.

Meanwhile, the next generation head protection system contract with the US Army – for which the group had been selected as the sole source supplier – is being re-tendered, and Avon Rubber still believes that it offers the “optimal solution” to win.

So, while the risks have not fully abated, they do appear to be less severe than investors had initially feared. The group is continuing to pull in new orders, and with just $13m of net debt (excluding lease liabilities), it has sufficient balance sheet firepower to make further acquisitions. With the shares trading at 27 times consensus 2022 earnings, that doesn’t seem overly demanding for the quality and long-term growth on offer. Buy.  Last IC View: Buy, 3,140p, 29 Jan 2021

(Source: Investors Chronicle)

 

04 May 21. AeroVironment Completes Acquisition of Telerob, Expanding Multi-Domain Robotic Systems Offering and Global Presence.

• Transaction combines leaders in unmanned aircraft systems (UAS) and unmanned ground vehicles (UGV) for broader, integrated mission solutions in air, near-space, ground and maritime domains
• Acquisition expected to be accretive within two years to AeroVironment GAAP EPS, and accretive to non-GAAP EPS in fiscal year 2022
• AeroVironment competing for multi-year United States Air Force Explosive Ordinance Disposal (EOD) robotic system program

AeroVironment, Inc. (NASDAQ: AVAV), a global leader in intelligent, multi-domain robotic systems, today announced it was granted clearance from the German government and completed the previously announced acquisition of Telerob Gesellschaft für Fernhantierungstechnik mbH (Telerob), in a $45.4m (€37.5m) cash transaction and the pay-off of approximately $9.4m (€7.8m) in Telerob’s debt at closing. Telerob now operates as a wholly-owned subsidiary of AeroVironment.

“Our acquisition of Telerob marks a significant expansion to our portfolio of intelligent, multi-domain robotic systems, from small and medium unmanned aircraft systems, to tactical missile systems and now, unmanned ground vehicles,” said Wahid Nawabi, AeroVironment president and chief executive officer. “We welcome the talented Telerob team and look forward to delivering even more capability to our customers in the United States and more than 50 allied countries around the world.”

“The entire Telerob team is excited to join forces with AeroVironment so we can deliver our expanded offering to current and new customers around the world,” said Norbert Gebbeken, Telerob managing director. “Delivering intelligent, multi-domain robotic solutions, both in the air and on the ground, can help more customers achieve their mission objectives. Working together with the AeroVironment team in the future has the potential to create even more compelling solutions in multiple applications and industries.”

Founded in 1994, Telerob offers one of the industry’s most advanced and comprehensive turn-key unmanned ground robotics solutions, including the telemax and tEODor EVO family of UGVs, fully-equipped transport vehicles and training, repair and support services. Telerob’s cutting-edge solutions safely and effectively perform a variety of dangerous missions, including explosive ordinance disposal (EOD), hazardous materials handling (HAZMAT) and chemical, biological, radiological and nuclear (CBRN) threat assessment. Telerob’s ruggedized UGVs possess all-terrain capabilities and offer some of the most advanced, specialized, precision manipulators, autonomous functionality and intuitive operation to deliver a high degree of mission flexibility. Telerob’s customers span 45 countries and numerous applications, including homeland security, emergency response and defense. Telerob is based near Stuttgart, Germany.

AeroVironment submitted a proposal with Telerob for the United States Air Force 10-year Indefinite Delivery, Indefinite Quantity (IDIQ) Large Explosive Ordnance Disposal (EOD) robot program, announced in October 2020. The Air Force has not announced the awardee for this program.

To learn more about advanced ground robotic solutions from Telerob, an AeroVironment Company, visit www.avinc.com/ugv.

ABOUT AEROVIRONMENT, INC.

AeroVironment (NASDAQ: AVAV) provides technology solutions at the intersection of robotics, sensors, software analytics and connectivity that deliver more actionable intelligence so you can Proceed with Certainty. Celebrating 50 years of innovation, AeroVironment is a global leader in unmanned aircraft systems and tactical missile systems, and serves defense, government and commercial customers. For more information, visit www.avinc.com.

ABOUT TELEROB, AN AEROVIRONMENT COMPANY

Telerob, an AeroVironment Company, is a leading manufacturer of defense and homeland security solutions based in Ostfildern near Stuttgart, Germany. The product range includes remote-controlled unmanned ground vehicles for disarming improvised explosive devices and investigating CBRN hazards, fully equipped service vehicles, as well as mobile system solutions ensuring the safety and security of critical infrastructure and people. For more information, visit https://www.telerob.com/en/.

 

03 May 21. Astro Aerospace to Acquire Horizon Aircraft. Astro Aerospace Ltd., a developer of eVTOL aerial vehicles and drones, and Horizon Aircraft Inc., a developer of advanced eVTOLs, have entered into an agreement under which Astro will acquire privately held Horizon for five million common shares of Astro stock, the material terms of which are disclosed in the Company’s related 8-K filing.

The transaction was unanimously approved by the respective Boards of Directors. The acquisition will broaden Astro’s capabilities, and become a leading eVTOL platform while continuing to invest and innovate. The Company’s acquisition of Horizon is expected to close in approximately ten days, subject to customary closing conditions. Upon closing the transaction, the CEO and Co-Founder of Horizon, Brandon Robinson, will be appointed as President of Astro and will sit on the Board of Directors. Jason O’Neill, Horizon’s Chief Operating Officer, will be appointed Executive Vice President of Astro.

Astro’s existing Alta and Elroy programs, combined with Horizon’s highly accomplished team of engineering and design talent, is expected to better position the Company to pursue its goal of commercialization. This approach will emphasize existing technology and elegant design to become a leader in the eVTOL market. The new funding provided by Astro will enable Horizon to accelerate development of its Cavorite X5 eVTOL advanced prototype. The Company believes this new aerospace technology offers significant advantages over current conventional aircraft including lower operating costs, a reduced noise footprint, increased safety and lower carbon emissions.

“Astro and Horizon, two organizations focused on developing innovative air mobility solutions, is a very exciting and promising combination. Our aligned business model, enhanced by the complementary expertise and capabilities of the founder-led Horizon team, creates significant opportunities for accelerated growth while simultaneously delivering value to our shareholders,”

said Astro CEO Bruce Bent.

Horizon Co-Founder and CEO Brandon Robinson stated, “The Horizon family has found a great home in Astro and will continue operating with its distinct culture: excellence in product development and a deep passion for aviation. Horizon and Astro share in the mission of being at the forefront of eVTOL design and together we will be a more attractive and exciting company for our employees, our partners, and our investors.”

Horizon co-founders Brandon and Brian Robinson have applied their excellence in Mechanical Engineering to change the way we approach travel. Brandon Robinson is a Mechanical Engineer, a CF-18 Fighter Pilot Top Gun graduate, and holds an MBA with more than $400m in project management experience. Horizon’s Chief Engineer, Brian Robinson (Brandon’s father) is also a Mechanical Engineer, beginning his innovation journey long before Horizon’s existence. Building aircraft from the age of 14, Brian’s previous aerospace engineering company achieved much success as it developed numerous first-of-its-kind innovations. This eventually led to designing a revolutionary new eVTOL prototype, making Horizon a pioneer in the market.

The Horizon Cavorite X5 eVTOL

Horizon has successfully completed more than 200 test flights of its sub-scale prototype Cavorite X5, a five-seat hybrid-electric eVTOL. The primary objective for the sub-scale eVTOL prototype’s test flights is to verify aerodynamics, control systems and transitional flight. For vertical flight, the wing surfaces retract to open its ducted fans before closing again after it achieves a minimum forward speed, maximizing the craft’s aerodynamic efficiency while lowering operational costs.

The full-scale Cavorite X5, which is expected to travel up to an estimated 450 km/h with a 500-kilometre range, is designed for reduced hydrocarbon emissions, operation in poor weather, and ease of flying for low-time pilots. The aircraft targets Urban Air Mobility but also long-range Regional Air Mobility, currently an underserved portion of the market. The patented fan-in-wing technology allows the Cavorite X5 to be the world’s first eVTOL that can fly the majority of its mission exactly like a normal aircraft.

Strategic Benefits of the Transaction:

• Horizon CEO and management to remain in key leadership roles
• Greater access to capital and industry experience to accelerate innovation
• Provides path to production and commercialization

About Horizon Aircraft Inc.

Horizon Aircraft is an advanced aerospace engineering company that has developed the world’s first eVTOL that can fly most of its mission exactly like a normal aircraft while offering industry-leading speed, range, and operational utility. Our unique designs place the mission first and prioritize safety, performance, and utility. Our Cavorite X5 eVTOL is designed to enter the market quickly and service a broad spectrum of early use-cases.

About Astro Aerospace

Astro Aerospace is the developer of an advanced, autonomous, short haul, eVTOL (Electric Vertical Take-off and Landing) aerial vehicles. Our mission is to make self-flying unmanned and manned vehicles available to anyone, at any time, from anywhere, bringing a new and exciting aircraft into a mainstream mode of transportation. (Source: ASD Network)

 

03 May 21. Noblis Acquires McKean Defense and Its Affiliates. Combination will expand Noblis’ Defense Mission Area impacts and bring new and complementary capabilities, technologies and contract vehicles to collective clients.

Noblis, a leading provider of science, technology and strategy services to the federal government, today announced it has acquired McKean Defense and its affiliates, Mikros Systems and Cabrillo Technologies, for an undisclosed amount. Recognized as a market leader in U.S. Navy surface ship readiness, modernization, sustainment and integration, McKean Defense is an employee-owned life-cycle management, engineering, enterprise transformation and program management business that supports Warfighters and helps clients reach new levels of mission support and transformation.

With this step, McKean Defense is now a wholly owned subsidiary of Noblis. The name of the new subsidiary will be the subject of a future announcement. Glenn Hickok, U.S. Navy veteran, seasoned industry executive and current vice president of Noblis’ Defense Mission Area, has been named president of the subsidiary and will also retain his current role. Joseph Carlini, McKean’s chief executive officer, has stepped down from his role and will serve as a strategic advisor through the integration process. The subsidiary will be governed by Amr ElSawy, Noblis’ president and chief executive officer, and the company’s board of trustees.

“As mission-driven companies, Noblis and McKean Defense have a common purpose to enrich lives and make our nation safer with a shared passion for excellence and innovation,” said ElSawy. “We are excited to welcome McKean employees to the Noblis family and look forward to combining forces to bring new and complementary solutions to address our clients’ growing needs.”

“McKean is an employee-owned company,” said Carlini. “As such, it was important for us to join an organization with a strong, ethical foundation, similar values and a singular focus on helping to advance national security priorities. We found that in Noblis, and I’m confident that together, our teams and service to our clients will thrive.”

“I’m already impressed by the McKean team. They have deep client relationships and extensive mission knowledge—particularly in the naval operations arena,” said Hickok. “Together, our team can remain agile while adding scale, capabilities and contract vehicles to expand our impacts in the Defense Mission Area and lean further forward in addressing our clients’ changing needs.”

Wolf Den Associates and Baird served as exclusive financial advisors for Noblis and McKean respectively on this transaction.

ABOUT NOBLIS

Noblis is a dynamic science, technology, and strategy organization dedicated to creating forward-thinking technical and advisory solutions in the public interest. We bring the best of scientific thought, management, and engineering expertise together in an environment of independence and objectivity to deliver enduring impact on federal missions. Noblis works with a wide range of government clients in the defense, homeland security, intelligence, law enforcement and federal civil sectors. Together with our wholly owned subsidiary, Noblis ESI, we tackle the nation’s toughest problems and apply advanced solutions to our clients’ most critical missions.

About McKean Defense

McKean Defense is an employee-owned life cycle management, engineering, enterprise transformation and total ship integration business headquartered in Philadelphia, PA. McKean Defense’s engineers, developers, technical staff, programmers, analysts and program managers identify and deploy new shipboard technologies, integrate information technology across shipboard platforms, implement cyber and advanced information technology systems and develop strategies to support the Warfighter. McKean Defense employees help customers reach new levels of mission support and transform their organizations. McKean consists of McKean Technical Services, Cabrillo Technologies and Mikros Systems. (Source: PR Newswire)

 

03 May 21. FLIR Systems, Inc. Settles Allegations of Misrepresentations Made to BIS and Other Government Agencies. The U.S. Department of Commerce’s Bureau of Industry and Security (BIS) has announced an administrative settlement of $307,922 with FLIR Systems, Inc., located in Wilsonville, OR. This settlement resolves BIS’s allegations that, between November of 2012 and December of 2013, FLIR made inaccurate or incomplete representations, statements, or certifications in violation of the EAR while seeking a determination that a newly developed Uncooled Focal Plane Array (UFPA) was subject to the EAR rather than the International Traffic in Arms Regulations. In advance of the determination, as the U.S. Government expressed concerns over the possible diversion of the UFPA to end-uses of concern, FLIR represented that the UFPA was designed specifically for insertion into commercial smartphones and recognized the need to prevent its diversion to uses other than insertion into smartphones. However, FLIR internally contemplated other markets for its product, developed plans for military applications involving nano reconnaissance drones, and later sold cameras incorporating the UFPA to a Norwegian customer in the defense industry for such drones. FLIR also represented to U.S. Government officials that the UFPAs incorporated a novel type of anti-tamper encryption protection to protect against diversion to end-uses of concern, but never actually successfully developed nor added such anti-tamper protections as a feature of the UFPA. Click here for the Settlement Agreement and related documentation. (Source: glstrade.com)

 

30 Apr 21. Austal to offload joint venture with Chinese firm. The ASX-listed prime has unveiled plans to sell its stake in a joint venture with a Chinese shipbuilding company, in a bid to redirect resources to its defence and commercial operations in the US and south-east Asia.

In a note to shareholders, Austal has confirmed it has commenced negotiations with Guangdong Jianglong Shipbuilding Company (Jianglong Shipbuilding) to sell its 40 per cent stake in Aulong Shipbuilding — a joint venture between the two companies, established in June 2016.

Aulong was originally established to enhance commercial passenger and non-military vessel opportunities in mainland China, with Austal since licensing a number of its commercial aluminium vessel designs for marketing and construction at Jianglong Shipbuilding’s facilities in Guangdong province.

Jianglong Shipbuilding has supported the venture with its workforce of 1,000 employees across two shipyards.

However, according to an Austal spokesperson, the domestic ferry business “hasn’t grown like the company had envisaged five years ago”.

As such, the Western Australia-based firm has decided to redirect its resources elsewhere.

“Austal’s focus is moving into steel shipbuilding in the US and growing our defence and commercial business in south-east Asia, so we can’t give the Aulong JV the attention and capital it needs to grow,” the spokesperson added. (Source: Defence Connect)

 

30 Apr 21. French group Safran maintains forecasts as quarterly sales fall 38%. French aero engine and equipment maker Safran (SAF.PA) reported on Friday a 38% drop in first-quarter revenues but maintained full-year forecasts as airlines face a bumpy recovery from the coronavirus pandemic.

Chief Executive Olivier Andries said the downturn reflected continued uncertainty over the industry’s worst crisis but voiced optimism about a relatively quick pickup in demand for medium-haul models that support much of Safran’s business.

Safran co-produces engines for the Boeing 737 MAX family and competes with Pratt & Whitney (RTX.N) on the Airbus A320neo in the busiest segment of the jetliner market through their CFM International venture.

Safran, which has warned of a delayed recovery to the market for engine services, said its widely watched civil aftermarket revenue fell 53.4% in dollar terms in the first quarter.

March airline traffic showed signs of improvement after stalling in January and February. It remains weak in Europe and Asia outside China, the company said.

Total revenues fell 37.9% to 3.342bn euros ($4.1bn) from 5.383bn.

Safran’s seats business was “strongly impacted” by the COVID-19 pandemic that has sharply reduced long-haul air travel.

However, it won an order for business-class seats from a “major U.S. airline” for the upcoming Airbus A321XLR.

Industry sources have said Airbus is asking engine makers for more thrust as it fine-tunes the jet’s design.

Andries said CFM had provided an engine meeting Airbus requirements and that there was “nothing new” on the project.

He said Safran would closely watch its supply chain as planemakers plan sharp increases in output next year.

The update came as Safran, MTU Aero Engines (MTXGn.DE) of Germany and Spain’s ITP Aero announced an agreement to produce, develop and support an engine for a new European combat jet, the Future Combat Air System.

Andries said Safran would keep control of the design of the engine under the plan, which expands an earlier deal between Safran and MTU. A demonstrator will be powered by the existing Safran-designed M88 engine used on France’s Rafale fighter. ($1 = 0.8253 euros) (Source: Reuters)

 

30 Apr 21. Lawmakers Darktrace shares jump 40% in IPO. Cambridge-based cyber security company and its backers raise £165m in London debut. Darktrace saw its shares jump by as much as 40 per cent on its London Stock Exchange debut on Friday, after the initial public offering raised £165m for the cyber-security company and its investors. Cambridge-based Darktrace priced its initial public offering at 250p per share, giving it an opening value of £1.7bn, in the biggest new tech listing since Deliveroo’s flop a month ago. Though that initial valuation had been about £1bn below Darktrace’s original target, its shares began trading as high as 350p in its first moments as a public company, according to Bloomberg data, putting it on track for a market capitalisation of around £2.4bn. The Cambridge-based company will raise £143.4m gross proceeds from the deal, with existing shareholders selling shares worth £21.7m. Around £25m more could be raised through an overallotment option if there is demand from investors. Conditional dealings on the London Stock Exchange began at 8am on Friday morning under the ticker “DARK”. Darktrace uses artificial intelligence to spot intruders into a company’s network and other security threats. Its revenues grew 45 per cent in its most recent financial year to almost $200m though it remains lossmaking. “Our company is deeply rooted in the UK’s tradition of scientific and mathematic research so we are especially proud to be listing on the London Stock Exchange,” Poppy Gustafsson, Darktrace’s chief executive said. “This milestone marks an exciting day for Darktrace.” Darktrace had originally hoped to achieve a value of up to £3bn, a person familiar with the plan said earlier this month. Earlier this week it set a price range of 220p-280p, which set its valuation range between £1.6bn-£1.9bn. Mike Lynch, who was Darktrace’s founding investor through his investment group Invoke Capital, is fighting extradition to the US over charges of fraud related to Hewlett-Packard’s $11bn purchase of Autonomy, the software company he co-founded, in 2011. Though Lynch has always denied any wrongdoing, Darktrace warned in its IPO filings of potential liabilities due to previous investments from the billionaire, whose family owns almost a fifth of the company ahead of the listing. In a statement on Friday, Gustafsson thanked Invoke, her previous employer, alongside other early investors including Talis Capital, Hoxton Ventures, Summit Partners, KKR and Vitruvian. “We owe much gratitude to the Invoke team for their pivotal role in the vision, technology, positioning and operational input in the early years without which today’s success would not have been possible,” she said. Jefferies, Berenberg and KKR Capital Markets are joint global co-ordinators for the float while Needham and Piper Sandler are acting as additional joint bookrunners. (Source: FT.com)

 

26 Apr 21. Intelsat’s Bankruptcy Court Hearings + Musk + AsiaSat. There’s to be a hearing at Intelsat’s bankruptcy court tomorrow (April 27th) where the judge will hear motions, including those from SES which is looking for the court to compel Intelsat to release more documents (and to hear the related Intelsat replies). The SES requests are firmly denied by Intelsat.

However, the court was informed on April 23rd that the two contesting parties had continued to meet and confer “and have substantially narrowed their disputes regarding this motion” and had agreed “in principle” to mediation to assist in resolving disputes over the release of document which Intelsat claims are privileged insofar that many are letters and communications from Intelsat’s legal advisors.

Intelsat told the court that it believes that the April 27th hearing also will be a status update on the parties’ agreements and the path forward.

Intelsat continues to accuse SES of resorting to “overblown rhetoric” in its argument. SES has claimed 12,322 privileged documents and Intelsat 15,381.

Intelsat, in its motion to deny SES its application for more documents to be released, says that the argument – at its heart – is simply a contract dispute over a core 31-page contract. “If SES had a case, it would not need over 230,000 documents and testimony from nearly 20 witnesses to try to prove that [we] breached a 31-page contract,” stated Intelsat, and alleges that SES “wants additional discovery that it hopes will support its weak contractual case.”

Finally, Intelsat is objecting to the SES motion for the court to compel Intelsat’s CTO Bruno Fromont to be re-interviewed under deposition. Intelsat says that Fromont’s deposition extended beyond the regulatory seven hours “and then some” and that SES at the end of the deposition were happy with the time given and answers supplied and “had no further questions.”

Seems as though Elon Musk is getting closer to winning FCC approval to fly some of his Starlink LEO satellites at even lower heights. Acting FCC Commissioner Jessica Rosenworcel has asked her board colleagues to formally vote on the plan, having herself endorsed the idea.

SpaceX is already licensed to operate 1,584 of its Starlink satellites at between 540-570 kms (335-354 miles) above the Earth. Musk has asked the FCC to approve a scheme to fly an additional 2,824 satellites at that same height.

If the FCC approves the move, it would mean that Starlink would be operating just below the heights already granted to Jeff Bezos and his Project Kuiper LEO fleet.

Project Kuiper – along with Telesat, Viasat and OneWeb – are objecting to the move, with Viasat claiming in an interview with the FCC that to grant approval would be akin to “a bomb going off” because of the risk of collision.

SpaceX’s Starlink officials say that the lower orbits mean extra safety and easier de-orbiting and speedier atmospheric burn-up for failed satellites.

SpaceX is reported to be planning its next launch of Starlink satellites on April 28th, when another 60 will be orbited, taking the overall total of working craft above 1,400. (Source: Satnews)

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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.

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