BATTLESPACE Updates

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17 Feb 22. nLIGHT, Inc. Announces Fourth Quarter and Full Year 2021 Results. Revenues of $270.1m and gross margin of 28.6% for the full year 2021 Revenues of $67.5m and gross margin of 26.6% for the fourth quarter of 2021. nLIGHT, Inc. (Nasdaq: LASR), a leading provider of high-power semiconductor and fiber lasers used in the industrial, microfabrication, and aerospace and defense markets, today reported financial results for the fourth quarter and full year 2021.

“nLIGHT delivered 21% year-over-year revenue growth in 2021, which was driven by a 41% year-over-year increase in sales to customers outside of China and growth in each of our end markets,” commented Scott Keeney, nLIGHT’s President and Chief Executive Officer. “While our geographic focus has shifted, our strategy remains focused on leveraging our vertically integrated business model to enable key growth markets.”

“In the fourth quarter of 2021, approximately 89% of our revenue was from customers outside of China, which grew 27% year-over-year. Total revenue for the fourth quarter of 2021 increased 3% year-over-year to $67.5 m, despite a 60% decrease in revenue from customers in China. Gross margin and Adjusted EBITDA were within the guidance range we provided in November. We continue to believe we are well-positioned to grow faster than the overall industry in the long-term.”

Full Year 2021 Financial Highlights

Revenues of $270.1m for the full year 2021 were up 21.3% compared to $222.8m for the full year 2020. Gross margin was 28.6% for the full year 2021 compared to 26.6% for the full year 2020. GAAP net loss for the full year 2021 was $(29.7)m, or net loss of $(0.70) per diluted share, compared to net loss of $(20.9)m, or net loss of $(0.55) per diluted share, for the full year 2020. Non-GAAP net income for the full year 2021 was $10.7m, or non-GAAP net income of $0.23 per diluted share, compared to non-GAAP net income of $7.3m, or non-GAAP net income of $0.17 per diluted share, for the full year 2020. Reconciliations of the non-GAAP metrics presented here to the most directly comparable GAAP metrics have been provided in the tables included at the end of this release.

Fourth Quarter 2021 Financial Highlights

Revenues of $67.5m for the fourth quarter of 2021 were up 2.7% compared to $65.7m for the fourth quarter of 2020. Gross margin was 26.6% for the fourth quarter of 2021 compared to 29.9% for the fourth quarter of 2020. GAAP net loss for the fourth quarter of 2021 was $(8.8)m, or net loss of $(0.20) per diluted share, compared to net loss of $(4.5) m, or net loss of $(0.12) per diluted share, for the fourth quarter of 2020. Non-GAAP net loss for the fourth quarter of 2021 was $(0.2)m, or non-GAAP net loss of $(0.01) per diluted share, compared to non-GAAP net income of $5.2m, or non-GAAP net income of $0.12 per diluted share, for the fourth quarter of 2020. Reconciliations of the non-GAAP metrics presented here to the most directly comparable GAAP metrics have been provided in the tables included at the end of this release.

Outlook

For the first quarter of 2022, nLIGHT expects revenues to be in the range of $61m to $67m, gross margin to be in the range of 21% to 25%, and Adjusted EBITDA to be approximately break-even.

We have not reconciled our outlook for Adjusted EBITDA because unrealized and realized foreign exchange gains and losses cannot be reasonably calculated or predicted nor can the probable significance be determined at this time. Accordingly, a reconciliation is not available without unreasonable effort. (Source: BUSINESS WIRE)

 

17 Feb 22. Airbus posts sharply higher core profit, ends 2-year dividend gap. Europe’s Airbus (AIR.PA) predicted 720 jetliner deliveries and higher profits in 2022 after core profit almost trebled last year on a partial recovery in air travel and higher defence and helicopter earnings.

The world’s largest jetmaker also ended a two-year dividend drought after swinging to a record net profit of 4.213bn euros ($4.8bn), boosted by the halting of production of its A380 superjumbo and a reversal of some COVID-19 charges. Airbus proposed a dividend of 1.5 euros a share.

“The pandemic is not yet fully behind us,” Chief Executive Guillaume Faury said, adding that tensions could be seen in supply chain, logistics and labour.

But he reaffirmed Airbus production goals and reiterated that the market would recover fully between 2023 and 2025.

“It has been clear that people want to fly again and do so as soon as restrictions are relaxed,” he said.

The group’s closely watched adjusted operating profit soared to 4.865bn euros from 1.706 bn a year earlier as revenue rose 4% to 52.149bn, buoyed by deliveries of 611 jets and cost cuts in helicopters and defence.

For 2022, Airbus predicted a core profit of 5.5bn.

For the fourth quarter, Airbus posted a better-than-expected core profit of 1.496 bn euros on revenue of 16.994 bn. Analysts were on average expecting 1.364bn and 16.878bn respectively, according to a company-compiled consensus.

Net cash rose more than 75% to 7.6bn euros, on its way back to a pre-crisis level of 12.5bn.

Airbus earnings were boosted by 274m euros clawed back money from previous write-offs to close Europe’s largest building, the A380 production plant in Toulouse, which it now plans to use to build in-demand narrowbody planes.

This almost halves a bill of 463m euros announced when Airbus halted production of the world’s largest jetliner after weak sales. The last A380 was delivered in December. On the negative side, Airbus took another charge of 212m euros on the A400M military airlifter, adding to billions written off on Europe’s largest defence project. (Source: Reuters)

 

16 Feb 22. Airbus reviews defence business as pressures mount.  Airbus (AIR.PA) has launched a review of its defence strategy that could open the door to more strategic partnerships as Europe’s arms makers juggle security threats and pressure from some investors, people familiar with the matter said. The most far-reaching examination of defence goals in years is being spearheaded by the company’s board in a sign of growing independence from its government shareholders, though any major changes would need political backing of France and Germany. Top management of Europe’s biggest aerospace group strongly backs defence as a source of stable revenues, political support and access to R&D funding. But the mainly independent board has the final say on strategy, subject to national security. The business faces a number of challenges, with France and Germany struggling to finalise plans for a costly new combat jet involving Airbus and Dassault Aviation (AM.PA), and the industry facing growing pressure from investors increasingly focused on environmental, social and governance (ESG) matters. In 2020, Airbus pledged to follow the path of aerospace firms that “nurture a substantial defence and space element in their portfolio to gain synergies and increase stability.”

But the board, led by former Deutsche Telekom chief Rene Obermann, is carrying out a deeper than usual dive as part of a rotating study of Airbus businesses, the people said, declining to be named over confidential discussions.

Airbus said it does not comment on any board discussions.

No immediate decisions are expected, though the people did not rule out more reliance on joint ventures or “strategic partnerships” to deliver on collaborative programmes.

The ESG issue came to the fore in September when Airbus was only able to join the enlarged DAX share index in Germany after a debate over inclusion of firms handling certain types of arms.

Airbus builds launchers for France’s nuclear deterrent but stresses it does not make warheads. Defence firms have also sought to draw a distinction between arms that preserve national security and more controversial weapons like landmines.

Anti-arms industry groups reject such distinctions.

The issue weighs especially heavily as the European Union draws up a crucial list of socially sustainable investments.

“We have the first financial institutions that say we don’t want to invest in such companies any more,” Airbus Defence & Space CEO Michael Schoellhorn told journalists in November.

Chief Executive Guillaume Faury, who also heads France’s main aerospace lobby, is leading an industry fightback and has questioned the logic of squeezing firms involved in national security at a time when the industry is also tackling emissions.

“There will be no decarbonisation if the world is in conflict … if we don’t ensure security,” Faury told Reuters in November. “We think security is at the core of ESG values.”

STEADY REVENUE

Airbus was born as a jetliner consortium in 1969 but today’s group springs from a merger of civil and defence assets in 2000.

The creation that year of a new parent group, EADS, reflected the belief that Europe’s fragmented arms sector needed to punch its weight against newly merged U.S. defence giants.

But efforts to balance civil and defence portfolios collapsed with the failed takeover of BAE Systems in 2012 and EADS was eventually folded into the core civil planemaker under a board that was handed greater independence from governments.

France and Germany maintain 11% each of the shares and a veto over certain strategic interests.

Defence revenues across divisions have been broadly steady since Airbus sold its defence electronics business in 2017 to help pay for losses on the A400M airlifter, totalling just under 11bn euros ($12.5bin).

Although the lack of growth has attracted critics, such stability was welcomed when the pandemic slashed civil demand. France, Germany and Spain have also placed new defence orders.

Defence revenues as a percentage of the group total – 21% – was 4 percentage points higher in 2020 than in 2017 and matched levels last seen in 2012 when Airbus tried to forge Europe’s largest defence company by buying BAE Systems.

That’s in contrast to the situation in 2019 when a pre-pandemic boom in civil jets pushed defence revenues down to 14% of the total, the lowest share in at least a decade.

Threats have meanwhile expanded to included the crisis in Ukraine. Arms spending by European Union states rose 5% to 198 bn euros in 2020, according to the European Defence Agency.

Although based in France, Airbus mainly represents Germany and Spain in European defence projects, with Germany’s Green-backed coalition seen as less friendly to defence exports.

“It is not an option for Airbus to get out of defence, it would cut the rope that provides backup from its core nations,” a senior European defence source said.

However, some European defence sources and analysts say Airbus faces challenges to deliver its vision of a digitally interconnected “combat cloud” for Europe’s new fighter jet project on its own after selling off electronics. Airbus and Dassault have yet to agree a detailed work plan. “(This) delay highlights far deeper tensions in the overall programme,” Agency Partners analyst Sash Tusa wrote in a note on Wednesday, adding France was increasingly considering a go-it-alone option to replace its Rafale warplanes. ($1 = 0.8800 euros) (Source: Google/Reuters)

 

17 Feb 22. Airbus reports strong Full-Year (FY) 2021 results.

  • 611 commercial aircraft delivered in 2021
  • Financials reflect strong operational performance group-wide
  • Revenues €52.1bn; EBIT Adjusted €4.9bn; EBIT (reported) €5.3bn
  • Free cash flow before M&A and customer financing € 3.5bn; Net cash €7.6bn
  • Record net income of €4.2bn; EPS (reported) €5.36bn
  • Dividend proposal: €1.50 per share
  • 2022 guidance issued

Airbus SE (stock exchange symbol: AIR) reported consolidated Full-Year (FY) 2021 financial results and provided guidance for 2022.

“2021 was a year of transition, where our attention shifted from navigating the pandemic towards recovery and growth. Thanks to the resilience and efforts of our teams, customers and suppliers, we delivered remarkable full-year results,” said Guillaume Faury, Airbus Chief Executive Officer. “The strong financials reflect the higher number of commercial aircraft deliveries, the good performance of our Helicopters and Defence and Space businesses as well as our efforts on cost containment and competitiveness. Record net income and our efforts to strengthen the net cash position underpin our proposal to reintroduce dividend payments going forward. At the same time, we continue to invest in our strategic priorities and in the transformation of our company.”

Gross commercial aircraft orders totalled 771 (2020: 383 aircraft) with net orders of 507 aircraft after cancellations (2020: 268 aircraft). Included were the first A350 freighter orders, confirming customer demand for this new programme. The order backlog was 7,082 commercial aircraft on 31 December 2021 (end 2020: 7,184 aircraft). Airbus Helicopters booked 414 net orders (2020: 268 units), achieving a book-to-bill ratio well above 1 both in terms of units and in value. These included 52 H160s of which 30 were the first batch of H160M military versions for France’s Joint Light Helicopter programme. Airbus Defence and Space’s order intake by value increased to €13.7bn (2020: €11.9bn), representing a book-to-bill ratio of around 1.3. Included were key orders in the Military Aircraft business such as the in-service support of the German and Spanish Eurofighter fleets as well as good export momentum for the C295, A330 MRTT and A400M airlifter.

Consolidated order intake by value increased to €62.0bn (2020: €33.3bn) with the consolidated order book valued at €398bn on 31 December 2021 (year-end 2020: €373bn). The increase in the backlog value mainly reflected the strengthening US dollar.

Consolidated revenues increased 4 percent to €52.1bn (2020: €49.9bn), mainly reflecting the higher number of commercial aircraft deliveries, partially offset by less favourable foreign exchange rates. A total of 611 commercial aircraft were delivered (2020: 566 aircraft), comprising 50 A220s, 483 A320 Family, 18 A330s(1), 55 A350s and 5 A380s. Revenues generated by Airbus’ commercial aircraft activities increased 6 percent, largely reflecting the higher deliveries compared to 2020. Airbus Helicopters delivered 338 units (2020: 300 units), including the first H160, with revenues rising 4 percent reflecting growth in services and the higher deliveries. Revenues at Airbus Defence and Space decreased by 2 percent, mainly driven by Military Aircraft, partially offset by Space Systems. Eight A400M aircraft were delivered in 2021.

Consolidated EBIT Adjusted – an alternative performance measure and key indicator capturing the underlying business margin by excluding material charges or profits caused by movements in provisions related to programmes, restructuring or foreign exchange impacts as well as capital gains/losses from the disposal and acquisition of businesses – was €4,865m (2020: €1,706m).

The EBIT Adjusted related to Airbus’ commercial aircraft activities increased to €3,570m (2020: €618m), mainly driven by the delivery performance and efforts on cost containment and competitiveness.

Commercial aircraft production is progressing in line with previously announced plans, in a complex environment. Specifically on the A320 Family, the ramp-up is on trajectory to achieve rate 65 by summer 2023 and the Company continues to de-risk notably by enabling all assembly sites to become A321-ready. For A320 Family production rates beyond 2023, the Company is still in the assessment phase and working with suppliers to potentially enable an increase above rate 65.

Airbus Helicopters’ EBIT Adjusted increased to €535m (2020: €471m), mainly driven by support and services, programme execution and cost focus.

EBIT Adjusted at Airbus Defence and Space increased to €696m (2020: €660m), reflecting continued cost containment.

On the A400M programme, development activities continued toward achieving the revised capability roadmap. Retrofit activities are progressing in close alignment with the customer. In the fourth quarter of 2021, a charge of €0.2bn was recorded mainly reflecting the updated estimates of the delivery pattern of the launch contract. This is reflected in EBIT reported.

Consolidated self-financed R&D expenses totalled €2,746m (2020: €2,858m).

Consolidated EBIT (reported) amounted to €5,342m (2020: €-510m), including net Adjustments of €+477m.

These Adjustments comprised:

  • €+274m related to the A380 programme, of which €+84m were in Q4;
  • €+122m gain from the sale of one site in France, recorded in Q4;
  • €-212m related to the A400M, of which €-209m were in Q4;
  • €-38m negative impact from foreign exchange and balance sheet revaluation, of which €+127m were in Q4;
  • €+331m of other Adjustments including mainly around €0.2bn of provision release related to the restructuring plan, and payments by suppliers. €+285m were booked in Q4.

The financial result was €-315m (2020: €-620m). It mainly reflects the net interest result of €-246m as well as the revaluation of financial instruments and of certain equity investments. Consolidated net income(2) was €4,213m (2020 net loss: €-1,133m) with consolidated reported earnings per share of €5.36 (2020 loss per share: €-1.45).

Consolidated free cash flow before M&A and customer financing was €3,515m (2020: €-6,935m), reflecting efforts on cash containment and a decrease in working capital, mainly driven by inventory improvement. Consolidated free cash flow was €3,511m (2020: €-7,362m).

On 31 December 2021, the gross cash position stood at €22.7bn (year-end 2020: €21.4bn) with a consolidated net cash position of €7.6bn (year-end 2020: €4.3bn). The Company’s liquidity position remains strong, standing at €28.7bn at the end of 2021.

The Board of Directors will propose the payment of a 2021 dividend of €1.50 per share to the 2022 Annual General Meeting. The payment date is 21 April 2022.

Outlook

As the basis for its 2022 guidance, the Company assumes no further disruptions to the world economy, air traffic, the Company’s internal operations, and its ability to deliver products and services.

The Company’s 2022 guidance is before M&A.

On that basis, the Company targets to achieve in 2022 around:

  • 720 commercial aircraft deliveries;
  • EBIT Adjusted of €5.5bn;
  • Free Cash Flow before M&A and Customer Financing of €3.5bn.

 

16 Feb 22. Allison Transmission Announces Fourth Quarter and Full Year 2021 Results.

  • Fourth Quarter Net Sales of $644m, up 20% year over year
  • Fourth Quarter Net Income of $118m, up 97% year over year
  • Fourth Quarter Diluted EPS of $1.15, up 117% year over year
  • Full Year Net Sales of $2,402m, up 15%
  • Full Year Net Income of $442m, up 48%
  • Full Year Diluted EPS of $4.13, up 58%
  • $513m of outstanding shares repurchased in FY2021, or 12% of outstanding shares

Allison Transmission Holdings Inc. (NYSE: ALSN), a leading designer and manufacturer of conventional and electrified vehicle propulsion solutions and the largest global manufacturer of medium- and heavy-duty fully automatic transmissions for commercial and defense vehicles, today reported a 20 percent increase in net sales from the same period in 2020, and a 14 percent increase from the third quarter of 2021, resulting in the strongest revenue quarter of the year, as production accelerated to meet robust customer demand.

David S. Graziosi, Chairman and Chief Executive Officer of Allison Transmission commented, “2021 was another notable year for Allison’s growth objectives. Net sales accelerated in the fourth quarter, largely driven by a strong recovery to pre-pandemic levels in the Outside North America On-Highway end market. In fact, fourth quarter net sales were up sequentially across all of our end markets, as our global customers and partners worked diligently to meet global demand. I am proud of the Allison team’s continued execution and strong performance, and excited about the future, as we continue to fund growth initiatives that will drive further success and are aligned with our long-term strategy of continuous global market leadership expansion.”

Graziosi continued, “We recently announced an investment in Autotech Ventures, a venture capital firm that’s helping to pave the way for the next frontier of mobility. Autotech invests in and provides consulting services to early-stage transport technology start-ups focused on connectivity, autonomy, sharing, electrification and digitization in the transport tech space. This partnership will significantly enhance our efforts to identify strategic opportunities and continue investing in innovative companies.

Lastly, our prudent and well-defined approach to capital allocation continues to have a meaningful impact on earnings per share. In 2021, we settled over $500m of share repurchases, representing 12 percent of shares outstanding as of December 31, 2020. During each of the last five years we have repurchased on average, 10 percent of outstanding shares annually, while simultaneously increasing EPS by more than 200 percent in aggregate.”

Fourth Quarter Financial Highlights

Year-over-year results were led by a 38 percent increase in net sales in the Outside North America On-Highway end market principally driven by strong customer demand in Asia and the persistent execution of growth initiatives. Year-over-year results were further led by a $26 m increase in net sales in the North America Off-Highway end market driven by improving demand for hydraulic fracturing applications, a $24 m increase in net sales in the Outside North America Off-Highway end market driven by higher demand in the energy, mining and construction sectors and a 19 percent increase in net sales in the Service Parts, Support Equipment and Other end market principally driven by increased demand for North America On-Highway service parts and global support equipment, and price increases on certain products.

Net sales for the quarter were $644m. Net income for the quarter was $118m. Diluted EPS for the quarter was $1.15. Adjusted EBITDA, a non-GAAP financial measure, for the quarter was $220m. Net cash provided by operating activities for the quarter was $168m. Adjusted free cash flow, a non-GAAP financial measure, for the quarter was $105m.

Fourth Quarter Financial Results

Gross profit for the quarter was $305m, an increase of 21 percent from $253m for the same period in 2020. Gross margin for the quarter was 47.4 percent, an increase of 10 basis points from a gross margin of 47.3 percent for the same period in 2020. The increase in gross profit was principally driven by higher net sales and price increases on certain products partially offset by unfavorable material costs and higher manufacturing expense commensurate with higher net sales.

Selling, general and administrative expenses for the quarter were $79m, a decrease of $1 m from $80 m for the same period in 2020. The decrease was principally driven by unfavorable 2020 product warranty adjustments that did not reoccur in 2021 partially offset by higher commercial activities spending.

Engineering – research and development expenses for the quarter were $50m, an increase of $10m from $40m for the same period in 2020. The increase was principally driven by increased product initiatives spending.

Net income for the quarter was $118m, an increase of $58m from $60m for the same period in 2020. The increase was principally driven by higher gross profit and expenses related to the long-term debt refinancing in November 2020 that did not reoccur in 2021 partially offset by increased product initiatives spending.

Net cash provided by operating activities was $168m, an increase of $9m from $159m for the same period in 2020. The increase was principally driven by higher gross profit and lower cash interest expense partially offset by higher operating working capital requirements and increased product initiatives spending.

Fourth Quarter Non-GAAP Financial Measures

Adjusted EBITDA for the quarter was $220m, an increase of $34m from $186m for the same period in 2020. The increase in Adjusted EBITDA was principally driven by higher gross profit partially offset by increased product initiatives spending.

Adjusted free cash flow for the quarter was $105m, a decrease of $23m from $128m for the same period in 2020. The decrease was principally driven by increased capital expenditures partially offset by higher net cash provided by operating activities.

Full Year 2022 Guidance

Allison expects 2022 Net Sales in the range of $2,625 to $2,775m, Net Income in the range of $430 to $520 m, Adjusted EBITDA in the range of $865 to $975m, Net Cash Provided by Operating Activities in the range of $570 to $680m, Adjusted Free Cash Flow in the range of $400 to $500m and Capital Expenditures in the range of $170 to $180m.

Our 2022 net sales guidance reflects higher demand in the Global On-Highway, Global Off-Highway and Service Parts, Support Equipment & Other end markets as a result of the ongoing global economic recovery, continued strength in customer demand and price increases on certain products. Our full year 2022 guidance also reflects a 10% increase in engineering – research and development expenses to fund product development initiatives in support of organic growth across all of our end markets. (Source: BUSINESS WIRE)

 

15 Feb 22. Leidos Holdings, Inc. Reports Fourth Quarter and Fiscal Year 2021 Results.

– Revenues: $3.49bn for fourth quarter (up 7% year-over-year); $13.74bn for the year (up 12% year-over-year)

– Diluted Earnings per Share: $1.23 for fourth quarter (down 10% year-over-year); $5.27 for the year (up 21% year-over-year)

– Non-GAAP Diluted Earnings per Share: $1.56 for fourth quarter (down 4% year-over-year); $6.62 for the year (up 14% year-over-year)

– Cash Flows from Operations: $210m for fourth quarter; $1.03 bn for the year

– Initial FY22 guidance reflects growth in revenues and solid margin and cash flow performance

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

Roger Krone, Leidos Chairman and Chief Executive Officer, commented: “2021 was a banner year for Leidos, with industry-leading organic revenue growth and expanded profitability. In addition, we enhanced our market presence during the year with strategic acquisitions and investments that added important technical capabilities. Despite the ongoing impact of COVID-19 and an extended Continuing Resolution, we are positioned to grow in 2022, bolstered by our scale, differentiated technical offerings, and dedicated workforce.”

As of December 31, 2021, Leidos ended the three-year forecast period laid out at its 2019 Investor Day, exceeding or achieving all financial targets. Over the period, Leidos grew revenues at a compound annual growth rate of 10%, achieved a net income margin of 5.5% and converted 164% of its net income attributable to Leidos stockholders into cash flows from operations. In addition, Leidos grew organically at a compound annual growth rate of 7% (versus 5% target), achieved an adjusted EBITDA margin of 10.8% (versus 10% or greater target) and converted 116% of its adjusted net income into free cash flow (versus 100% or greater target).

Summary Operating Results

Revenues were $3.49bn for the quarter and $13.74bn for the year, up 7% and 12% over the comparable 2020 periods, respectively. Excluding acquired revenues of $52m for the quarter and $325m for the year, organic revenues increased 6% and 9%, respectively. For the year revenues grew organically across all reportable segments. The largest contributors for the quarter and the year were the increase in veterans’ disability examinations after the pause from the COVID-19 pandemic and the ramp-up of the Navy Next Generation Enterprise Network Recompete (NGEN-R) Service Management, Integration and Transport (SMIT) contract.

Net income was $176 m, or $1.23 per diluted share, for the quarter, and $759m, or $5.27 per diluted share, for the year. Net income margin for the quarter was 5.0%. The weighted average diluted share count for the quarter was 142 m, compared to 144m in the prior year quarter. For the year net income and diluted EPS were both up 21% compared to fiscal year 2020. Net income margin for the year increased to 5.5% from 5.1% in fiscal year 2020 as a result of strong program management, higher volumes on certain fixed price programs and $26m net benefit from an adjustment to legal reserves related to the Mission Support Alliance joint venture recorded in the first quarter of fiscal year 2021.

Adjusted EBITDA was $359m for the fourth quarter, representing an adjusted EBITDA margin of 10.3%. For the year adjusted EBITDA was $1.51 bn (11.0% margin), up 14% over fiscal year 2020. Non-GAAP net income was $224 for the quarter and $952m for the year, which generated non-GAAP diluted EPS of $1.56 for the quarter and $6.62 for the year. For the year non-GAAP net income and non-GAAP diluted EPS were up 13% and 14%, respectively, compared to fiscal year 2020.

Cash Flow Summary

Net cash provided by operating activities for the quarter was $210m for an operating cash flow conversion ratio of 121%. After adjusting for payments for property, equipment and software, quarterly free cash flow was $177m for a free cash flow conversion ratio of 80%. For the year net cash provided by operating activities was $1.03bn (137% conversion) and free cash flow was $927m (98% conversion).

For the quarter Leidos used $37m in investing activities and $69m in financing activities. For the year Leidos used $730m in investing activities and $113m in financing activities. On November 22, 2021, Leidos signed a definitive agreement within the Defense Solutions segment to dispose of its Aviation & Missile Solutions LLC (“AMS”) business to focus on leading-edge and technologically advanced services, solutions and products. The sales price will be approximately $18m, subject to certain adjustments, and the sale is expected to be completed during the first quarter of fiscal year 2022.

During fiscal year 2021, Leidos made open market repurchases of common stock for an aggregate purchase price of $237m and returned $199m to shareholders as part of its regular quarterly cash dividend program. In addition, Leidos borrowed $380m, paid down $106m of debt and completed strategic acquisitions and investments for preliminary purchase consideration of approximately $627m. As of December 31, 2021, the Company had $727m in cash and cash equivalents and $5.1bn in debt.

On February 11, 2022, the Leidos Board of Directors declared that Leidos will pay a cash dividend of $0.36 per share on March 31, 2022, to stockholders of record at the close of business on March 15, 2022. In addition, the Board authorized a stock repurchase program under which Leidos may repurchase up to 20 m shares of its common stock, which supersedes the prior February 2018 share repurchase authorization. Stock repurchases may be made on the open market at prevailing market prices or in privately negotiated transactions including through accelerated share repurchase or derivative transactions, transactions with Leidos retirement and deferred compensation plans, transactions under 10b5-1 plans or 10b-18 plans or any of the foregoing combined or otherwise. Whether repurchases are made and the timing and actual number of shares repurchased depends on a variety of factors including price, corporate capital requirements, other market conditions and regulatory requirements. The repurchase program may be accelerated, suspended, delayed or discontinued at any time.

New Business Awards

Net bookings totaled $3.2bn in the fourth quarter of fiscal year 2021 and $15.5bn for fiscal year 2021, representing a book-to-bill ratio of 0.9 and 1.1, respectively. As a result, backlog at the end of fiscal year 2021 was $34.5bn, of which $7.4bn was funded. Included in the quarterly bookings were several notable awards:

  • Air Combat Command Intelligence, Surveillance and Reconnaissance Program. Leidos was awarded a task order by the Air Combat Command (ACC) Acquisition Management and Integration Center (AMIC) to continue its support to ACC intelligence, surveillance and reconnaissance (ISR) operations. Under the contract, Leidos will provide subject matter expertise and threat mitigation support for ACC ISR operations along with a full range of intelligence support and ISR operational services that encompass analysis and assessment support, ISR training support and intelligence support for HQ ACC Staff, subordinate NAF Staffs, Centers and Wings. The single-award, firm-fixed price task order has a one-year base period of performance, four one-year options and a total contract value of up to approximately $531m if all options are exercised.
  • Hypersonic Thermal Protection System Capability. Dynetics, a wholly owned subsidiary of Leidos, was awarded a contract to develop Hypersonic Thermal Protection System (TPS) prototypes for the U.S. Army’s Rapid Capabilities and Critical Technologies Office (RCCTO). Under the contract, Dynetics will also support materials research, novel inspection and acceptance efforts. The cost-plus-fixed fee award has a total value of up to $479m over six years.
  • Federal Parent Locator Service. Leidos was awarded a new prime contract to continue supporting the Office of Child Support Enforcement (OCSE) within the Department of Health and Human Services, Administration of Children and Families. Under the contract, Leidos will continue to support OCSE’s Federal Parent Locator Service (FPLS) with operations and maintenance, continuation of system development and enhancement, data center operations and a disaster recovery center. The single award contract has a maximum value of $76m and a period of performance of approximately five years if all options are exercised. (Source: PR Newswire)

 

15 Feb 22. Babcock buys out Australian JV partner. Babcock (BAB) is buying out its joint venture partner in an Australian business that provides maintenance services to the country’s naval fleet. The defence and engineering group is paying A$60mn (£32mn) to acquire the remaining 50 per cent of its Australian Naval Ship Management arm, a company with 300 employees that services frigates, landing helicopter docks and other landing craft. Its revenue for the year ending in March 2021 was A$254m. Babcock has mainly been offloading companies over the past 12 months in a bid to simplify its structure and shore up its balance sheet. Last week, it completed the £95m sale of its stake in Air Tanker Holdings, a company that owns a fleet of planes used for air-to-air refuelling. This was its fourth major disposal, bringing in £448m in total. (Source: Investors Chronicle)

 

15 Feb 22. Insitu Tears Up Orbital Engine Supply Contract. Subsequent to the Australian Securities Exchange announcement released 31 January 2022, Orbital Corporation Ltd advises that it has received confirmation from customer Insitu Inc. of the termination of the third engine development program under its long term supply agreement. Following an economic review of the engine program, Insitu – a wholly owned subsidiary of The Boeing Company – has issued a Termination of Convenience with immediate effect. Under the contracted terms, a Termination of Convenience entitles Orbital UAV to a full reimbursement of all costs incurred on the program to date. Due to the reimbursement of costs, the termination of the third engine development program will not impact the Company’s full year revenue guidance. Scheduled volumes of the two existing engine models Orbital UAV has in production for Boeing-Insitu are not impacted and the Company continues to focus on its other engine development programs with Tier 1 customers, including Textron Systems, one of Singapore’s largest defence companies and Skyways.

Orbital establishes UAV facility in the United States

Orbital Corporation Limited is pleased to confirm the establishment of a purpose built facility in the United States of America to support the Company’s unmanned aerial vehicle (“UAV”) operations. The facility is located in Hood River, Oregon, in close proximity to the operational base of key Orbital customer Insitu-Boeing.

Securing an Orbital facility in Hood River has been a logical step for the Company’s UAV strategy. Orbital have found the commercial and industrial real estate market in Hood River to be tightly competitive. Due to limited suitable locations for Orbital’s requirements the Company had been contemplating land acquisition and construction as an alternative to finding a suitable leasehold option.

Orbital will be the primary and exclusive tenant of a new purpose built facility which is expected to be ready for occupation in February 2018. The Company has a five year lease with an option to extend for two further terms of five years each. The Lease Agreement has standard commercial terms with the base rent plus occupancy costs expected to be approximately US$160,000 (A$215,000) per annum. Orbital intend to make specific improvements and customise the facility and the lease provides control to Orbital over internal design and fitout. This additional work will be at Orbital’s expense with the landlord assisting and facilitating construction. Costs required to set up the US facility will be funded from existing working capital. Operating costs will be offset by engine overhaul revenue, Australian operating efficiencies and near term business development opportunities.

UAV engine assembly and overhauls are scheduled to commence at Orbital’s new US facility in the first half of 2018. The facility will support Orbital’s delivery and service obligations in the Long Term Supply Agreement (“LTA”) with Insitu-Boeing (see ASX Announcement dated 23 December 2016).

The new facility is approximately 1,210 m2 (13,000 sq.ft.) with 930 m2 (10,000 sq.ft) available for production and engine testing, and approximately 280 m2 (3,000 sq.ft) of office space. In addition to supporting the Company’s existing propulsion system assembly and engine overhaul business, the close proximity of Orbital’s new US operational base to Insitu-Boeing will promote ongoing collaboration and business development opportunities.

[We understand that the company has meanwhile moved all production back to Australia Ed.]

Posted in Aircraft Propulsion & Energy, Business News and tagged Author on February 15, 2022 by The Editor.  (Source: UAS VISION)

 

14 Feb 22. Precision Optics Reports Second Quarter Fiscal Year 2022 Financial Results. Company Intends to Uplist to the NASDAQ Capital Market. Precision Optics Corporation, Inc. (OTCQB: PEYE), a leading designer and manufacturer of advanced optical instruments for the medical and defense industries, announced operating results on an unaudited basis for its second quarter fiscal year ended December 31, 2021.

The Company is also announcing that it intends to uplist to the NASDAQ Capital Market, has initiated the process to do so, and today released its preliminary proxy including an announcement that the Company will hold its first annual meeting since 2009.

The Company has scheduled a conference call for today, February 14, 2022 at 5:00pm ET to discuss the financial results and plans to uplist to the NASDAQ Capital Market.

Second quarter fiscal 2022 highlights:

  • Financial results for the second quarter of fiscal 2022 include contributions from Lighthouse Imaging which was acquired on October 5, 2021.
  • Revenue for the quarter ended December 31, 2021 was $3.90m compared to $2.79m in the same quarter of the previous fiscal year. Lighthouse contributed $1.18m in second quarter revenue.
  • Subsequent to the end of the quarter, the company received a production order for a defense/aerospace program of approximately $1.5m.
  • Subsequent to the end of the quarter, the Company received notice that one of its customer’s products, that has been in the Company’s development pipeline, has received 510(k) clearance from the FDA
  • Gross margins for the quarter ended December 31, 2021 were 29% compared to 31% in the same quarter of the prior year.
  • Net loss of $507,013 during the quarter included $350,452 of stock-based compensation and $94,055 of interest, depreciation and amortization expense. This compared to net loss of $213,456 in the same quarter a year ago.
  • The Company’s cash position at the end of the second quarter was $1.3m.

Precision Optics’ CEO, Joseph Forkey, commented, “The results of the second quarter included a significant rebound in revenue from the first quarter, both from organic operations and from the acquisition of Lighthouse Imaging.  The integration with Lighthouse is going well and we expect the synergies of the companies to result in accelerated growth going forward.  Our earlier acquisition of Ross Optical positioned us well to target larger defense/aerospace opportunities, and last week we announced the first of these with receipt of a production contract from a large new customer with an anticipated initial run rate of $3m per year.  Also, a number of customers for existing production products that had been stalled by the pandemic recently placed follow-on orders or indicated plans to do so in the near future.  Finally, we continue to have several programs in our engineering pipeline that are likely to move to production in the next twelve months – one of which received FDA clearance just two weeks ago.

Dr. Forkey continued, “It’s really gratifying to see all of these positive developments coming together now, especially following a couple of challenging pandemic-impacted years. Looking forward we are confident that this positive momentum will lead to significant top and bottom line growth in the latter half of fiscal year 2022 and beyond.”

Shareholder Meeting and Intent to List Shares on Nasdaq Capital Market

Today, the Company filed its preliminary proxy statement, including the announcement that the Company will be holding a shareholder meeting on April 8, 2022. Additionally, the Company is announcing it has initiated the process to list its shares on the Nasdaq Capital Market. In preparation for this listing, the Company will include in the proxy a motion for shareholder approval of a reverse split of shares at a rate within the range of 1.5:1 to 3:1. Depending upon a number of factors, including the future closing price of the Company’s stock, the Company may or may not elect to pursue the split in order to meet Nasdaq qualifications.

“Given the positive trajectory of the business, including the recent acquisition of Lighthouse Imaging, recovery of some programs from pandemic delays, significant orders from new customers and overall growth in the business, we feel the timing is appropriate to begin the process to list the Company on the Nasdaq Capital Market,” added Dr. Forkey. “We look forward to working through the process, with a goal to list following our annual shareholder meeting.” (Source: PR Newswire)

 

14 Feb 22. nLIGHT Acquires Process Monitoring Expert plasmo Industrietechnik. Expands nLIGHT’s industrial solutions into automated quality assurance and adds additional scale in Europe.

nLIGHT, Inc. (Nasdaq: LASR), a leading provider of high-power semiconductor and fiber lasers used in the industrial, microfabrication, aerospace, and defense markets, today announced that it has acquired the assets of plasmo Industrietechnik GmbH (“Plasmo”), an Austrian-based provider of automated quality assurance and diagnostic solutions primarily for the welding and additive manufacturing markets.

Plasmo’s innovative quality assurance solutions empower customers to implement robust, efficient, and cost-optimized production processes. Plasmo’s products are driven by proprietary machine vision and analysis software that monitor and help automate a wide range of industrial welding and additive manufacturing processes. Complementing nLIGHT’s expanding laser portfolio, the acquisition of the Plasmo assets strengthens nLIGHT’s position as a critical enabler of next generation manufacturing solutions in these growth markets.

“Plasmo is a technology leader in process monitoring and quality assurance systems for laser-based manufacturing processes,” said Jake Bell, general manager for industrial lasers. “Combining lasers with Plasmo’s real-time process monitoring solutions provide customers with a significant advantage as they develop, qualify and produce increasingly complex laser-printed or welded parts, particularly for high volume electric vehicle production,” said Mr. Bell.

With Plasmo, nLIGHT has expanded its European footprint in support of critical customers and strategic markets. “Our new team members in Germany and Austria are positioned geographically to serve a critical, growing part of the industrial market,” said Mr. Bell.

About nLIGHT

nLIGHT, Inc. is a leading provider of high-power semiconductor and fiber lasers for industrial, microfabrication, aerospace and defense applications. Our lasers are changing not only the way things are made but also the things that can be made. Headquartered in Camas, Washington, nLIGHT employs over 1,275 people with operations in the U.S., China and Finland. For more information, please visit www.nlight.net. (Source: BUSINESS WIRE)

 

14 Feb 22. End of Lockheed-Aerojet deal puts pressure on leadership of both firms. Lockheed Martin’s exit from its planned purchase of engine maker Aerojet Rocketdyne has refocused investors on the compounding list of problems at both companies, as pressure grows on Lockheed management to improve lagging performance. Shares of both Lockheed Martin Corp (LMT.N) and Aerojet Rocketdyne Holdings Inc (AJRD.N)fell on Monday after Lockheed walked away from the deal. read more

Aerojet said it now planned to deliver value to shareholders by advancing hypersonics and strategic, tactical and missile defense systems. Lockheed said it will focus “on the most effective use of capital with the highest return on investment, including our ongoing commitment to return value to shareholders.”

Lockheed’s problems are stacking up, and exiting the deal dealt a loss to CEO Jim Taiclet who has not been able to deliver significant share price appreciation since taking over in June 2020 in the midst of a global pandemic.

In October, management cut sales expectations for both 2021 and 2022, which sent shares down 12%.

The weapons maker said COVID-19 had hobbled its supply chain, but on its post-earnings call with analysts in October, Ron Epstein with Bank of America forced Taiclet to defend his leadership when he asked, “Where are you taking the company? And what’s the vision here? Because it really seems – and I know this may be – might sound unfair, but it seems a little bit rudderless right now.”

Lockheed’s strategy of facilitating the military “internet of things” has failed to gain traction with investors, analysts have said. Making matters worse, Lockheed’s premiere product, the stealthy F-35 fighter jet, could see softer demand from the U.S. Air Force in coming years. The jet makes up about a quarter of the company’s revenue.

In an interview on Monday, Epstein said, “Their strategy has to pivot. If the defense budget (is) growing low-single digits and you have peer companies that are growing with low-single digits and you’re not, most likely the market’s not going to be pleased with that.”

Cowen analyst Cai Von Rumohr said in a note on Monday that while Lockheed had indicated it could still do mergers, “It’s more likely to seek small technology accelerators rather than larger transactions that might face stiffer regulatory hurdles.” Von Rumohr said that in the near-term it was possible the Bethesda, Maryland-based company could increase its share buyback.

At Aerojet, a top shareholder is seeking to revamp the board of directors.

On Feb. 1, Warren Lichtenstein, Aerojet’s executive chairman of the board, launched a proxy fight to replace three members of the company’s board of directors. He wants to ensure the company has the ability to succeed without the deal.

Aerojet filed a countersuit to a lawsuit by Lichtenstein on Feb. 11 asking the court to appoint a special committee in response to the proxy contest. (Source: Reuters)

 

11 Feb 22. Italian intelligence watchdog flags small, sneaky foreign takeovers in defense. Italy’s intelligence watchdog has called for tighter, U.S.-style monitoring of corporate acquisitions after allegations that China quietly purchased an Italian military drone maker that supplied Italy’s special forces. In its latest annual report, the Italian parliamentary intelligence oversight committee (COPASIR, in Italian) pushed the government to beef up monitoring of acquisitions, urging it to follow the example of the U.S. Committee on Foreign Investments in the United States, better known as CFIUS.

“(CFIUS) goes beyond checking transactions which are announced and actively monitoring all activity in the market which could be deliberately omitted,” the committee said.

The alarm was prompted by a raid last year by Italian tax police on Alpi Aviation, a firm in Pordenone in northern Italy which produces the Strix UAV.

Weighing 10kg with a three meter wingspan, the Strix can relay video and infrared imagery in real time and was used by Italy’s special forces in Afghanistan.

Investigators said a 75% share in the firm was purchased in 2018 at an inflated price by a Hong Kong-based company in turn controlled by Chinese state firms, which planned to transfer production to China.

The sale allegedly violated Italy’s “Golden Power” law, under which defense firms, as well as strategic companies, can only be sold outside Italy with specific permission from the government.

The tax police said the firm failed to notify the Italian government of the change in ownership, then also broke Italian law on defense exports by failing to inform the government when it temporarily exported a drone for display at a 2019 Shanghai trade fair.

Lawyers for the firm have denied the allegations, which may lead to fines from the government for violation of the Golden Power rule, as well as criminal charges for illegal defense exports.

In its annual report, released this week, the parliamentary intelligence committee, known as Copasir, said the Alpi Aviation allegations proved the need for a “reinforcing” of the Golden Power rule, meaning better monitoring of acquisitions.

Progress had already been made by giving a senior tax police official at seat on the Golden Power committee, the report said, but claimed more was needed.

Just like the CFIUS, Golden Power officials needed to proactively seek out acquisitions where the true buyer was hidden, the report said.

An interagency U.S. government committee created in 1975 and chaired by the U.S. Treasury, CFIUS reviews and can block foreign acquisitions.

Furthermore, the report called on the Italian government to monitor activity before an acquisition, looking at the potential buyers given access to Italian company’s data rooms during due diligence phases, when “much sensitive information and industrial secrets are shared with foreign entities, notwithstanding a confidentiality agreement.”

An Italian government source told Defense News the government generally followed the advice of COPASIR.

The report said that Italy’s Golden Power legislation had been invoked to study 800 proposed financial transactions since 2012, with a veto on acquisitions used three times.

It warned that the purchases of small firms and start-ups were more likely to escape the attention of officials, and also claimed the legislation was not tough enough to halt Chinese influence over Italy’s 5G network.

The report also raised the alarm over the threat of Chinese investment in Italian ports, an apparent rebuttal of the decision by an Italian government in 2019 to sign up to China’s Belt and Road initiative, which envisaged such investment.

It also claimed Italian universities could be used as “Trojan Horses” by Chinese agents seeking to access research.

Hampered by poor funding, universities were vulnerable to Chinese offers of investment, leading to the “real risk of technology and know-how being stolen.” (Source: Defense News Early Bird/Defense News)

 

11 Feb 22. CAE reports third quarter fiscal 2022 results.

  • Revenue of $848.7m vs. $832.4m in prior year
  • EPS of $0.08 vs. $0.18 in prior year
  • Adjusted EPS(1) of $0.19 vs. $0.22 ($0.19 excluding COVID-19 government support programs(2)) in prior year
  • Operating income(3) of $65.5m vs. $82.9m in prior year
  • Adjusted segment operating income(4) of $112.7m vs. $97.2m ($86.6m excluding COVID-19 government support programs(5) ) in prior year
  • Free cash flow(6) of $282.1m vs. $224.0m in prior year
  • Orders(7) of $1,377.2m for $9.2 bn backlog(7) and 1.62x book-to-sales ratio(7)
  • Civil book-to-sales of 1.93x and training centre utilization(8) of 60%
  • Defence book-to-sales of 1.39x and 1.05x for the last 12 months

(NYSE: CAE) (TSX: CAE) – CAE today reported revenue of $848.7m for the third quarter of fiscal 2022, compared with $832.4m in the third quarter last year. Revenue was 15% higher this quarter, excluding $93.5m of revenue in the third quarter last year from a contract to provide the Canadian government with ventilators as part of CAE’s COVID-19 humanitarian initiatives. Third quarter net income attributable to equity holders was $26.2m ($0.08 per share) compared to $48.8m ($0.18 per share) last year. Adjusted net income(9) in the third quarter of fiscal 2022 was $60.7m ($0.19 per share) compared to $60.0m ($0.22 per share) last year.

Operating income this quarter was $65.5m (7.7% of revenue), compared to $82.9m (10.0% of revenue) last year. Third quarter adjusted segment operating income was $112.7m (13.3% of revenue) compared to $97.2m (11.7% of revenue) last year. Adjusted segment operating income excluding COVID-19 government support programs was $112.7m (13.3% of revenue) compared to $86.6m (10.4% of revenue) last year. All financial information is in Canadian dollars unless otherwise indicated.

“I am very pleased with our performance in the third quarter, having delivered double-digit growth, strong free cash flow, and a near doubling of order intake compared to the third quarter last year — all of which adds to my conviction in the path to a larger, more resilient, and more profitable CAE in the future,” said Marc Parent, CAE’s President and Chief Executive Officer. “In a still-challenging global environment, we delivered 15 percent revenue growth, before the contribution of our ventilator humanitarian initiative last year, 16 percent higher adjusted segment operating income, and $0.19 of adjusted earnings per share. Free cash flow was a healthy $282.1m, underscoring the cash generative nature of our business. Most notably, we made excellent progress on the order front with a book-to-sales ratio of 1.62 times, securing nearly $1.4bn in orders and concluding the quarter with a $9.2bn backlog. In Civil, we booked $753m in orders for a 1.93 times book-to-sales ratio, including long-term training agreements with airlines and business aircraft operators, and 19 full-flight simulator sales. In Defence, we booked orders for training and mission support solutions valued at $593m for 1.39 times book-to-sales. And in Healthcare, we continued to drive double-digit revenue growth with our reenergized organization and innovative solutions.”

On CAE’s outlook, Parent added, “we have been adeptly playing offence during this period of disruption and the long-term outlook for CAE has never looked more attractive. We expect pandemic headwinds to be with us for some time, including ongoing supply chain disruptions, employee and customer absenteeism due to infections, operational constraints by local authorities, and intermittent border restrictions. The current COVID-19 surge has extended the timeline to a broad global recovery, but our performance in the quarter confirms that we are on the path to strong cyclical recovery and secular growth when our markets eventually open and emerge from the pandemic.”

Civil Aviation Training Solutions (Civil)

Third quarter Civil revenue was $390.1m vs. $412.2m in the third quarter last year on a 10 percentage point increase in Civil training centre utilization to 60%, and lower full-flight simulators (FFSs)(11) deliveries, with seven this quarter compared to 10 in the third quarter last year. The lower number reflects timing differences in the quarterly phasing of FFS deliveries and remains consistent with the outlook for approximately 30 for the year. Civil training services revenue, including CAE’s interest in joint ventures, was approximately 10% higher compared to third quarter last year. Operating income was $57.1m compared to $48.4m in the same quarter last year. Adjusted segment operating income was $83.4m (21.4% of revenue) compared to $62.0m (15.0% of revenue) in the third quarter last year. Adjusted segment operating income excluding COVID-19 government support programs, of which there was none this quarter, was also $83.4m (21.4% of revenue) compared to $58.4m (14.2% of revenue) in the same quarter last year.

During the quarter, Civil signed training solutions contracts valued at $752.5m, including contracts for 19 FFSs sales, bringing FFS sales for the first nine months to 33. Since the end of the quarter, Civil has signed orders for an additional four FFSs, bringing the year-to-date tally to 37. More than 60% of the FFS orders Civil has received so far this fiscal year are from customers in the Americas where air travel recovery and pilot training demand has been much more pronounced. Notable training contracts for the quarter include five-year extensions of commercial aviation training agreements with Avianca and Endeavor Air, a nine-year commercial aviation training agreement with Norwegian, as well as five-year business aviation training agreements with Global Jet Luxembourg, XO Jet and Vista Jet. Civil also announced the expansion of its pilot training capacity in Dubai and will deploy its first Bombardier Global 6500 FFS to the Emirates-CAE Flight Training Centre joint venture.

The Civil book-to-sales ratio was 1.93x for the quarter and 1.20x for the last 12 months. The Civil backlog at the end of the quarter was $4.6bn.

On October 28, 2021, CAE announced it entered into an agreement to acquire Sabre’s AirCentre airline operations portfolio. Subject to completion, the acquisition will further expand its reach across its broad customer base beyond pilot training and establish itself as a technology leader in the growing market for industry-leading, digitally-enabled flight and crew operations solutions. The agreement, which is valued at US $392.5m excluding post-closing adjustments, includes the Sabre AirCentre product portfolio, related technology and intellectual property as well as the transfer of AirCentre’s highly talented workforce. The closing of the transaction is expected in the first quarter of calendar 2022 and is subject to customary conditions and regulatory approvals.

Defence and Security (Defence)

Third quarter Defence revenue was $426.5m, up 42% compared to the third quarter last year, which includes $127.9m from L3Harris Technologies’ Military Training business (L3H MT). Operating income was $16.5m compared to $21.8m in the same quarter last year. Adjusted segment operating income was $32.0m (7.5% of revenue), including $19.6m from L3H MT, compared to $22.3m (7.5% of revenue) in the third quarter last year. Adjusted segment operating income, excluding COVID-19 government support programs, was also $32.0m (7.5% of revenue) compared to $15.9m (5.3% of revenue) in the same quarter last year. The organic Defence business (Defence excluding L3H MT) delivered higher sequential revenue and adjusted segment operating income this quarter but remained lower compared to last year. This is a result of COVID-19 impacts on orders and program execution, particularly internationally, sustained since the onset of the pandemic.

Defence booked orders for $592.6m, including competitive prime awards, recompetes and contract expansions, across all five domains (Air, Land, Sea, Space and Cyber). In the Air domain, Defence strengthened its international presence with the German Air Force’s competitive selection to provide Ab Initio pilot training, replacing the 60-year incumbent. Along with this new live-flight training program, Defence also expanded its relationship with the US Navy’s Chief of Naval Air Training (CNATRA) by adding T-45 live-flight training to its instructional services contract. Beyond live-flight training, Defence was awarded a multi-year contract from an Australian customer to provide integrated support and training on a range of strategic platforms. Other contract expansions include four task orders on Defence’s Simulator Common Architecture Requirements and Standards (SCARS) single award IDIQ, as the US Air Force accelerates the integration and standardization of approximately 2,400 simulators across 300 locations.

Broadening beyond its core Air, Land and Sea programs, Defence won its first competitive prime contracts in Cyber and Space. Since the end of the quarter, Defence was awarded a contract by Canada’s Department of National Defense (DND) to expand cyber intrusion detection capabilities on the Innovation for Defence Excellence and Security (IDEaS) program, and it was awarded its first prime simulation contract in the Space domain. These strategic Cyber and Space prime contracts, along with Defence’s first Intelligence Community (IC) competitive prime win in the second quarter, further establish CAE Defence as the world leading platform agnostic, training and simulation pure play ensuring mission readiness by integrating solutions across all five domains.

The Defence book-to-sales ratio was 1.39x for the quarter and 1.05x for the last 12 months (excluding contract options). The Defence backlog, including options and CAE’s interest in joint ventures, at the end of the quarter was $4.6 bn. The Defence pipeline remains strong with some $6.2 bn of bids and proposals pending customer decisions.

Healthcare

Third quarter Healthcare revenue was $32.1m, vs. $120.9 m in the third quarter last year, which included $93.5 m revenue from a contract to supply the Canadian government with ventilators. Excluding revenue from the ventilator contract last year, revenue would have been 17% higher this quarter. Operating loss was $8.1 m compared to an income of $12.7m in the same quarter last year. Adjusted segment operating loss was $2.7m compared to an income of $12.9m (10.7% of revenue) in the third quarter last year. Adjusted segment operating loss excluding COVID-19 government support programs was also $2.7m, compared to an income of $12.3m (10.2% of revenue) in the same quarter last year. Healthcare continued to deliver year over year quarterly revenue growth (excluding ventilators), as it ramps up an expanded and reenergized organization with a clear focus on achieving greater scale.

Healthcare launched an update of the Inventory Manager for CAE LearningSpace Enterprise tool, which expands LearningSpace by offering a single platform to track manage and report on simulation centre assets, and a new e-commerce platform for its skills trainers, elevating the user experience and broadening customer access (https://medicalskillstrainers.cae.com/).

During the quarter, Healthcare released CAE Vimedix 3.3, an update to its ultrasound education platform, which provides the ability to easily build assessments or create exercises, includes new instructional content focused on point-of-care ultrasound and emergency medicine and introduces an all-new Virtual Probe feature. Healthcare also introduced 11 new on-demand online digital courses through its collaboration with the British Columbia Institute of Technology, which features a virtual simulation targeting specific medical assessments and treatments.

Additional financial highlights

CAE incurred restructuring, integration and acquisition costs of $47.2m during the third quarter of fiscal 2022, including $17.4m related to L3H MT, and $23.0m related to the restructuring program in connection with the previously announced measures to best serve the market by optimizing CAE’s global asset base and footprint, adapting its global workforce and adjusting its business to correspond with expected levels of demand for certain products and services. The Company continues to expect significant annual recurring cost savings to ramp up to a run rate of approximately $65 to $70m by the start of fiscal year 2023.

Net cash provided by operating activities was $309.6m for the quarter, compared to $234.8m in the third quarter last year. Free cash flow was $282.1m for the quarter compared to $224.0m in the third quarter last year. The increase was mainly due to a lower investment in non-cash working capital, partially offset by payments related to the integration and acquisition costs of its recently acquired businesses and severances and other costs associated with the previously announced restructuring program.

Income tax expense this quarter amounted to $2.6m, representing an effective tax rate of 8%, compared to an effective tax rate of nil for the third quarter last year. The income tax rate was impacted by restructuring, integration and acquisition costs this quarter, and excluding these costs the income tax rate used to determine adjusted net income of $60.7m and adjusted EPS of $0.19 in Q3FY22 was 20%. In the third quarter of last year, the income tax rate was impacted by restructuring costs and tax audits. Excluding the effect of these elements the rate would have been 16% in the third quarter last year. On this basis, the increase in the tax rate was mainly attributable to the mix of income from various jurisdictions.

Growth and maintenance capital expenditures totaled $76.9m this quarter.

Net debt(14) at the end of the quarter was $2,310.5m for a net debt-to-capital ratio of 36.5%. This compares to net debt of $2,481.5m and a net debt-to-capital ratio of 38.2% at the end of the preceding quarter.

Adjusted return on capital employed (ROCE)(16) was 6.1% this quarter compared to 6.6% last quarter and 6.4% in the third quarter last year. Adjusted ROCE excluding COVID-19 government support programs was 5.5% this quarter compared to 5.5% last quarter and 5.0% in the third quarter last year.

CAE’s participation in the Government of Canada CEWS program (COVID-19 government support) ceased on June 5, 2021 and accordingly, CAE did not claim any CEWS benefits for wages and salary costs incurred subsequent to June 5, 2021.

Management outlook

Since the start of the pandemic in March 2020, CAE has made several important strategic moves by seizing opportunities arising from market disruption, including raising approximately $1.6bn in equity to pursue a pipeline of growth opportunities, and securing (or announcing) nine accretive acquisitions. At the same time as expanding CAE’s reach externally, the Company embarked on enterprise level initiatives to substantially lower its cost structure and achieve even greater levels of operational excellence, including consolidating its global asset base and innovating digitally enabled processes. CAE has been carrying out a growth strategy with the intent to emerge from the pandemic a larger, more resilient, and more profitable company than ever before. Specifically, as a waypoint along its journey to cyclical recovery and beyond, the Company is currently targeting to reach a consolidated adjusted segment operating margin of approximately 17% by the time its markets are generally recovered, with steady room for further improvement thereafter. It expects to reach this level of profitability on a significantly larger base of business with a post-pandemic capital structure that will allow the Company to sustain ample flexibility to further invest in its future.

Notwithstanding the ongoing challenges posed by the pandemic, CAE is already delivering stronger financial performance, expanding and optimizing its position, and booking substantial orders. Pandemic-related headwinds are expected to persist for some time, including supply chain disruptions, sporadic staffing shortages due to COVID-19 infections, operational constraints imposed by local authorities, and intermittent border restrictions. The emergence and rapid spread of the Omicron variant is extending the timeline to a broad global recovery but has not changed management’s positive view of CAE’s potential as its end markets eventually open and emerge from the pandemic.

Expected secular trends are favourable for all three of the Company’s core business segments. Greater desire by airlines to entrust CAE with their critical training and digital operational support and crew management needs, higher expected pilot demand (attrition and crisis-induced career shifts) and strong growth in business jet travel demand are enduring positives for the Civil business. The paradigm shift from asymmetric to near-peer threat and recognition of the sharply increased need for digital immersion-based, synthetic solutions in national defence are tailwinds that favour the Defence business. Healthcare is poised to leverage opportunities presented by a growing nursing shortage and rising demand for Public Safety and Security.

The Company believes there is considerable pent-up demand for air travel, and the slope of Civil’s recovery to pre-pandemic levels and beyond depends on the timing and rate at which border restrictions and quarantine measures around the world can safely be lifted. Civil’s strong training performance in the Americas and increased FFS order activity, provide a compelling blueprint for the potential of a broader global recovery. In fiscal year 2022, the Company expects strong growth in Civil for the year overall.

Given the increasing relevancy of training and simulation, CAE’s Defence segment is also on a multi-year path to becoming a larger and more profitable business. Management is currently focused on the successful integration of L3H MT and expects to fully realize the $35 to $45m of cost synergies by fiscal year 2024. Defence is now more closely aligned with its defence customers’ utmost priorities and is established as the world’s leading platform agnostic, global training and simulation pure play defence business. This is expected to bring increased potential to capture business around the world, accelerated with the expanded capability and customer set the combined entity now possesses. CAE’s U.S. Defence business continues to be relatively less impacted by the pandemic, although it also faces a near-term budgetary headwind on new program starts as a result of the congressionally enacted Continuing Resolution (CR). COVID-19 related headwinds are most persistent for the international defence business; however, management views them as temporary, and continues to expect to deliver strong growth for fiscal year 2022 notwithstanding these impacts. It expects this improvement to be driven by a reacceleration of order intake, including for higher-margin product programs, and for its annual Defence book-to-sales ratio to surpass 1x for the first time in the last four years. The Company also expects stronger Defence performance to be driven by the progressive realization of synergies related to the L3H MT integration.

And in Healthcare, the outlook is for continued quarterly year over year growth, as it gains share in the healthcare simulation and training market and focuses on achieving greater scale. The long-term potential is for Healthcare to become a material and profitable business within CAE, and for the current fiscal year, management expects it to deliver top- and bottom-line double-digit growth (excluding ventilators).

Total capital expenditures are expected to exceed $250m in fiscal year 2022, primarily in support of sustainable and accretive growth opportunities. The Company usually sees a higher investment in non-cash working capital accounts in the first half of the fiscal year, and as in previous years, management expects a portion of the non-cash working capital investment to reverse in the second half. The Company continues to target a 100% conversion of net income to free cash flow for the year. In addition to restructuring, integration and acquisition costs related to the L3H MT acquisition in Defence, CAE expects to incur total restructuring expenses related to its ongoing cost saving initiatives of approximately $50m in fiscal year 2022. The Company continues to expect to reach a run-rate annual recurring cost savings of approximately $65 to $70m by the start of fiscal year 2023. Management’s expectations are based on the prevailing market conditions, the timing and degree of easing of global COVID-19-related mobility restrictions, and customer receptivity to CAE’s training solutions and operational support solutions as well as material assumptions contained in this press release, quarterly MD&A and in CAE’s fiscal year 2021 MD&A. (Source: PR Newswire)

 

11 Feb 22. Huntington Ingalls Industries’ revenues fall by 2.9% in Q4 2021. The military shipbuilding company’s net earnings also dropped to $120m in Q4 2021. US-based military shipbuilding company Huntington Ingalls Industries (HII) has posted revenues of $2.67bn in the fourth quarter of 2021, that ended on 31 December 2021. The figure represents a 2.9% decline from the $2.76bn recorded in the same quarter of 2020. The company’s net earnings also fell by 51.8%, from $249m in Q4 2020 to $120m in Q4 2021, primarily due to a decrease in shipbuilding operations amid Covid-19 related challenges. The company’s segments Ingalls Shipbuilding, Newport News Shipbuilding, and Technical Solutions all reported a reduction in quarterly revenues.

HII’s operating income in Q4 2021 was $120m, down 60.7% compared to $305m in Q4 2020. The company’s operating margin also fell from 11.1% to 4.5% on a year-on-year (YoY) basis.

Diluted earnings per share were $2.99 in the quarter. The figure was $6.15 in the same period a year ago.

HII’s annual revenues increased 1.7% YoY to $9.5bn. Net earnings totalled $544m in 2021, down from $696m a year ago.

HII president and CEO Mike Petters said: “We are pleased with another year of consistent programme execution in the face of a challenging operational environment on multiple fronts.

“Over the course of 2021, we completed transformational changes in our technical solutions division, and we believe we have positioned the enterprise for sustainable, long-term value creation as we move forward.”

The company expects that shipbuilding revenue will be between $8.2bn and $8.5bn in FY22. The shipbuilding operating margin is expected to be between 8% and 8.1%. In November 2021, HII reported a 33.8% drop in Q3 net earnings. (Source: army-technology.com)

 

11 Feb 22. UASA concerned by Denel request for more funding. Trade union UASA has expressed concern over another Denel application for funding at a time when there is still no clear plan to pay outstanding salaries.

UASA spokesperson Abigail Moyo said the application for a government bailout to keep Denel from falling into the abyss of bankruptcy follows mere days after the second report of the Zondo Commission into State Capture, which revealed damning evidence about the former Denel Board and management’s role in the looting and hollowing out of the state-owned weapons manufacturer.

“The enterprise has been receiving state intervention for years while those in charge looted the exact funds meant to rescue the company and turn it into a revenue and job generator,” Moyo stated.

“Denel has been unable to pay workers’ full salaries for the past two years, making it almost impossibly difficult for its employees to survive. The SOE owes R636m to staff and R900m to suppliers.”

UASA sees little hope for the state weapons manufacturer despite repeated financial injections. It reported a loss of R2bn in 2019/2020, generating only R2.7bn in revenue. It received recapitalisations of R1.8bn in 2019/2020 and again R576m in 2020/2021, as well as an extended R5.9bn guaranteed debt facility. In 2021 Denel received an additional R2.9bn to cover its debt.

“UASA strongly urges government to hold all directors and executives who played a part in the looting of Denel accountable and make examples of them and pay outstanding salaries,” Moyo said. “It is time to claim South Africa’s state-owned enterprises back from the claws of looters. A complete overhaul is needed to open the door to economic recovery and create sustainable jobs for our people once more.”

National Treasury’s decision on whether or not Denel will receive additional state funding will be announced in the upcoming budget.

Denel’s liquidity challenges caused it to miss loan payments at the end of January, and the Johannesburg Stock Exchange suspended the trade of its bonds due to the company’s failure to publish its annual report.

Trade union Solidarity was in court on 10 February to try and get Denel to pay R90m in outstanding salaries and benefits owed to hundreds of its members that employed by the state-owned company. (Source: https://www.defenceweb.co.za/)

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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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