Sponsored by TCI International Inc.
12 May 22. Proxy advisers split over vote on Leonardo CEO liability action. Proxy advisers ISS and Glass Lewis were split over whether shareholders at Italian defence group Leonardo (LDOF.MI) should vote against a request to start a liability action against CEO Alessandro Profumo, documents showed. In 2020, Profumo was sentenced in the first instance to six years imprisonment for false accounting in his previous role as chairman of Banca Monte dei Paschi di Siena (BMPS.MI).
Leonardo later backed Profumo, saying “conditions did not exist” for him to resign as the decision could be overturned by second or third instance courts.
However, activist investor Bluebell Partners in April this year proposed a liability action against the CEO, asking for compensation for reputational damage stemming from the conviction.
ISS recommended shareholders vote against the request saying there was “no sufficient grounds to remove Profumo from his role and undertake any legal action against him”.
The proxy adviser advised however the “company supervises carefully and rigorously the situation and, if necessary, takes the required measures”.
Glass Lewis in turn recommended a vote in favour of the request, saying the conviction has had a “substantial negative reputational impact” on the company.
“While the sentence is subject to appeal, we believe that it serves as a substantial indication that the actions of Alessandro Profumo might harm shareholder value and that a liability action may be warranted,” it added.
When asked for a comment on the proxy recommendations, Leonardo referred to a statement it made in April when it said the board had accepted Bluebell’s proposal for a vote at the upcoming annual general meeting to guarantee maximum transparency and full exercise of shareholder rights but added it considered the arguments put forward by Bluebell as “groundless”.
The AGM is scheduled for May 23. (Source: Reuters)
12 May 22. TT Electronics plc AGM Trading Update.
Continued strong order intake, with full year outlook unchanged.
TT Electronics plc (“TT”, “the Group”), a global provider of engineered electronics for performance critical applications, publishes the following trading update on the Group’s performance for the four months to the end of April 2022 (the ‘period’), ahead of the AGM taking place later today.
Strong Demand Continuing
Trading in the period reflects the ongoing healthy growth trends in TT’s focus end-markets and the strength of our customer relationships. Group revenue was 6 per cent higher than the previous year on a constant currency basis and 5 per cent higher on an organic1 basis.
Order intake continues to run well ahead of revenue with book to bill for the four months running at 151 per cent.
Good Operational Execution
Overall, the business continues to execute well in the face of COVID disruption and the well-documented supply chain issues. In the period, our Power and Connectivity facility in Dongguan was temporarily closed, but our larger GMS facility in Suzhou, near Shanghai, has remained open.
Our Sensors and Specialist Components and GMS divisions are performing well, whilst the results of our Power and Connectivity division are expected to be second half weighted. Our well-established self-help initiatives and our decisive action on pricing continue to effectively offset current cost inflation.
The integration of the Ferranti acquisition is progressing to plan and the team have already been successful with new business opportunities.
Given the high levels of demand and supply chain constraints, we have continued to invest in inventory to support the growth of the business. As a result, our net debt and leverage at the end of June are expected to increase from the year-end position before reducing to more normalised levels by the year end.
Full year expectations unchanged
Whilst macroeconomic conditions remain uncertain, the year has started well, with continued growth in our end markets, and good execution against the well-documented challenges.
Accordingly, management’s outlook for the year as a whole is unchanged.
12 May 22. The LGL Group Reports First Quarter 2022 Results. The LGL Group, Inc. (NYSE American: LGL) (the “Company” or “LGL”) announced its financial results for the three months ended March 31, 2022.
- Revenue of $8.1m increased 24.1% compared to $6.5m for Q1 2021.
- Diluted net income of $0.03 per share compared to $0.01 per share for the prior year quarter.
- Backlog of $37.0m at March 31, 2022, up 24% compared to $29.8m as of Q4 2021.
- Balance sheet cash and marketable securities of $44.5m.
- Net working capital of $51.6m including $5.9m of inventory.
- Adjusted EBITDA for Q1 2022 was $715,000 or $0.13 per diluted share compared to $197,000, or $0.04 per diluted share for Q1 2021.
- A special meeting of stockholders to vote on the Company’s strategic Spin-Off initiative will be held on June 21, 2022.
Mike Ferrantino, LGL’s Chief Executive Officer, stated, “We are well positioned to implement our MtronPTI Spin-Off initiative with a strong balance sheet and a significant increase in MtronPTI operational backlog. We are encouraged by the recovering avionics market and strong defense business performance but are cautiously optimistic given current economic headwinds. I am proud of our MtronPTI team’s success and dedication while facing the challenges of inflation, supply chain disruption and workforce availability.”
James Tivy, LGL’s Chief Financial Officer added, “We continue to hold 1,288,620 IronNet common shares, of which 250,000 shares were hedged and in the money at the end of the period.”
RESULTS FROM OPERATIONS
Revenues were $8.1 m compared to $6.5m for the first quarter of 2021, up 24.1% versus the prior year quarter. The revenue increase reflects the recovering avionics market and strong defense product shipments. Gross margins were 37.6% compared to 32.7% for the prior year quarter benefiting from an increase in business volume.
Backlog was $37.0m versus $29.8m at the beginning of the year and $20.4 m at the end of the first quarter 2021. Quarterly bookings were $15.3m for the first quarter of 2022 and $15.2m for the fourth quarter of 2021. This record booking trend during the last two quarters reflects improved orders from the recovering avionics market along with strong defense orders, including $9.8m from two major missile defense programs, much of which is expected to ship subsequent to 2022.
GAAP operating income was $221,000 compared to a loss of $60,000 in the first quarter of 2021, inclusive of $111,000 of spin-off costs and 233,000 of non-cash stock compensation incurred during the first quarter of 2022.
Investment income was $45,000 compared to $127,000 for the first quarter of 2021.
First quarter 2022 net income was $169,000 compared to $27,000 in the prior year quarter. Diluted earnings per share were $0.03 and $0.01 for the three months ended March 31, 2022 and 2021, respectively.
Adjusted EBITDA, a non-GAAP measure, was $715,000 in the first quarter of 2022 versus $197,000 in the first quarter of 2021.
The Company’s strong balance sheet reflects cash and marketable securities of $44.5m, $6.0 m of which relate to our IronNet, Inc. (IRNT) positions, and total net working capital of $51.6m at March 31, 2022. Total inventory was $5.9m, including $2.6m of raw materials, $2.4m of WIP, and $0.9m of finished goods.
We held 1,288,620 IRNT shares at March 31, 2022, of which 250,000 shares were hedged at the end of the period. As a subsequent event, this hedge was closed leaving the IRNT position intact and resulting in pretax hedge proceeds of $1,263,000.
The Company has set Tuesday, June 21, 2022, at 9:00 a.m. local time, as the date and time of a special meeting of stockholders to vote on the Spin-Off. As previously announced, LGL Group’s Board of Directors approved the spin-off of M-Tron Industries, Inc. and its wholly-owned subsidiaries (collectively, “MtronPTI”). The spin-off is expected to be structured as a tax-free, pro-rata distribution to all LGL shareholders. If completed, upon effectiveness of the transaction, LGL shareholders would own shares of both companies. Completion of any spin-off would be subject to various conditions, including approval of shareholders and relevant regulatory bodies. It is also expected that MtronPTI will be treated as discontinued operations from a GAAP reporting perspective, effective upon shareholder approval. There can be no assurance that the potential spin-off transaction will be completed in the manner described above, or at all.
LGL believes that, if completed, the potential spin-off of MtronPTI would enable shareholders to more clearly evaluate the performance and future potential of each entity on a standalone basis, while allowing each to pursue its own distinct business strategy and capital allocation policy. Separating MtronPTI as an independent, publicly owned company positions the business to increase value to both MtronPTI and LGL Group. The spin-off permits each company to tailor its strategic plans and growth opportunities, more efficiently raise and allocate resources, including capital raised through debt or equity offerings, flexibly use its own stock as currency for teammate incentive compensation and potential acquisitions and provide investors a more targeted investment opportunity.
The LGL Group continues to strive for profitable growth internally and by acquisition. The LGL Group, on a pro-forma standalone basis after the spin-off, will continue to own and develop its frequency reference and time standard synchronization solutions business through its Precise Time and Frequency LLC (“PTF”) subsidiary platform, and is expected to retain substantially all the company’s cash and marketable securities.
The LGL Group has successfully spun off several businesses over its history, including Lynch Interactive, The Morgan Group, Tremont Advisors, and others. MtronPTI itself sought to become an independently listed company via an IPO, filing a form S-1 registration statement with Needham & Company as the underwriter in 2000. This IPO was pulled as a result of market conditions. MtronPTI has an established and formidable presence in its key markets today and if the spin-off is completed, the standalone MtronPTI would continue providing market-leading engineered solutions to its defense and aerospace customers. The potential spin-off is thus a continuation of the company’s strategy of developing businesses and positioning them as independent entities to enhance shareholder value and alignment. (Source: BUSINESS WIRE)
12 May 22. Raytheon Technologies venture capital group invests in Hermeus. RTX Ventures partners with hypersonic aircraft startup to accelerate innovation in the aerospace and defense sectors. Raytheon Technologies (NYSE: RTX) today announced a strategic investment in Hermeus Corporation, a company developing hypersonic aircraft for defense and commercial applications, through its newly established corporate venture capital group, RTX Ventures.
Joining Hermeus’ previously announced $100m Series B financing round, RTX Ventures’ investment in the company will directly support the buildout of its first aircraft, Quarterhorse, and accelerate development of its next aircraft, Darkhorse.
RTX Ventures makes strategic investments in early-stage companies, accelerating the development of transformational aerospace and defense technologies. Beyond just making investments, RTX Ventures leverages the strengths of the broader Raytheon Technologies organization to support successful growth in its portfolio companies.
“Hypersonic technologies are of critical importance to national security, which is why we made our first investment in a company with such a bold plan and vision in this space,” said Daniel Ateya, managing director of RTX Ventures. “Hermeus’ technical approach and business plan balances near-term defense applications with long-term commercial aspirations and will help our customers reimagine the possibilities of hypersonic technologies.”
“Hypersonic aircraft will radically accelerate air travel and enable the United States to address critical national security challenges,” said AJ Piplica, CEO at Hermeus. “Speed is our lifeblood at Hermeus, and I’ve been impressed with the ability of the team at RTX Ventures to embody that virtue. We look forward to expanding collaboration and continued acceleration of our vision for a faster future.”
RTX Ventures focuses on supporting companies developing technologies that are strategically aligned to the Raytheon Technologies portfolio, with an emphasis on four broad priority areas: secure and connected ecosystems, autonomy and artificial intelligence technologies, power and propulsion systems, and precision sensing and effects.
12 May 22. Autonomous encapsulated UAS company SpearUAV announces Series B funding round of $17m, led by UVision Air Ltd. SpearUAV – developer of an autonomous, AI-based technology for encapsulated SWARM-based UAS – announces a $17m investment in its Series B round of funding. The round was led by UVision Air, a market leader in loitering munitions systems, and included several other investors. This latest investment in the company reflects its expansion in the international defense and homeland security (HLS) markets and in providing solutions through unmanned aerial tools for armies and law enforcement agencies around the world.
Intended for a wide range of intelligence-gathering and precision-attack missions, Spear’s breakthrough drone technology enables immediate and intuitive launch from a capsule, with specific solutions for air, land and sea missions.
“The company’s current fundraising success is another step in establishing SpearUAV as a leader in breakthrough technology in the world of unmanned air vehicles, giving soldiers new aerial dimension and full air autonomy in the field,” says Colonel (Ret.) Gadi Kuperman, Founder & CEO of SpearUAV. “Together with UVision, which led this round of funding, SpearUAV will be able to provide diverse solutions for a wide range of needs compatible with the modern battlefield, including drone swarm array operation, ISTAR operations, precise attack capabilities, and more.”
“Spear’s systems have been operationally proven and we believe that they have enormous potential in the international defense market,” says Major General (Ret.) Avi Mizrachi, CEO of UVision. “The purpose of this investment is to generate a strong synergy between the two companies. UVision expands its portfolio offering a comprehensive solution for varying operational needs from the micro-tactical forces and brigade level, to the division level. The companies are already collaborating on technological knowledge to develop new systems.”
12 May 22. MDA Ltd. (TSX: MDA), a leading provider of advanced technology and services to the rapidly expanding global space industry, today announced financial results for the first quarter ended March 31, 2022 demonstrating strong order bookings, growing backlog and solid profitability.
“With triple digit year over year growth in backlog, strong margins, and healthy operating cash flow in the first quarter, MDA is building momentum with our full focus on delivering for customers and capitalizing on new opportunities” said Mike Greenley, Chief Executive Officer of MDA. “We continue to execute on our strategy and gain market traction with several sizeable wins across the business, including Globalstar’s LEO constellation and Phase B of Canadarm3. As we enter our second year as a public company, we are energized by the recent progress and highly focused on growing the business and strengthening our position in core markets.”
FIRST QUARTER HIGHLIGHTS
Backlog of $1.52bn was up 122% year over year driven by sizeable awards across MDA’s business areas, primarily Globalstar’s LEO constellation award (~$415m contract) in our Satellite Systems business, and Phase B of Canadarm3 award ($269m contract) in our Robotics & Space Operations business.
Revenues of $128.4m were up 4% compared to Q1 2021 driven by increased work volume, primarily in our Robotics & Space Operations business.
EBITDA increased to $35.6m from $29.5m in Q1 2021. Adjusted EBITDA was $44.5 m compared to $39.1 m in Q1 2021. Excluding the impact of historical Investment Tax Credits (ITC) claims of $16.8 m which were recognized in Q1 2022, and Canada Emergency Wage Subsidy (CEWS) income contribution in Q1 2021, adjusted EBITDA was $27.7 compared to $29.0 m in Q1 2021 primarily reflecting higher research & development costs in Q1 2022. Adjusted EBITDA margin, excluding the previously mentioned ITC claims and CEWs income, was 21.6% in Q1 2022 compared to 23.5% in Q1 2021.
Operating cash flow improved to $14.7m in the latest quarter, up from $0.1m in Q1 2021 reflecting higher net income and lower cash interest expense paid year over year.
Healthy financial position with net debt to adjusted EBITDA ratio of 0.6x at quarter end.
Subsequent to quarter-end, MDA announced the redemption of its $150m second lien notes (bearing interest at 10% per annum) and refinancing of its revolving credit facility to $600m from $428m. The refinancing of our debt facilities will allow us to meaningfully reduce our annual interest costs while increasing our borrowing flexibility and preserving sufficient liquidity to fund future growth.
2022 FINANCIAL OUTLOOK
As a leading space technology provider, we are leveraging our capabilities and expertise to execute on specific growth strategies across our end markets and business areas. Underlying industry trends for space continue to be strong and market activity remains robust. We believe our long term future growth pipeline is significant and underpinned by the existing contract awards of our key programs. With Telesat Lightspeed, Canadarm3, the Canadian Surface Combatant and Globalstar programs already under initial contracts, in Q1 we made and are continuing to make significant progress on next-phase contract negotiations, program definition and development, and risk reduction activities. We believe our backlog and recent awards including Globalstar’s LEO satellite constellation and Canadarm3 Phase B, provide us with revenue visibility and a strong business foundation for 2022 and beyond.
We continue to monitor developments related to the Covid-19 pandemic and supply chain disruptions which can impact the timing of programs, our overall productivity and ability to engage directly with our customers. We are taking pro-active measures across our three business areas to mitigate the impact on our operations to the extent possible.
Consistent with the outlook provided in Q4 2021, we expect our 2022 revenues to be $750 – $800 m, representing robust year over year growth of approximately 55% – 65%, and expect 2022 adjusted EBITDA to be $140 – $160m. The adjusted EBITDA forecast excludes the $16.8m amount reported in Q1 2022 related to the resolution of historical ITC claims. Our 2022 forecasts are predicated on continued backlog growth in the first half of 2022, with year over year revenue inflection commencing in the second quarter of 2022 and accelerating throughout the balance of the year. We expect our Q2 2022 revenues to grow by approximately 20% – 25% compared to Q2 2021 levels. We expect capital expenditures in 2022 to be $180 – $220m, primarily comprising of growth investments to support CHORUS and the previously outlined growth initiatives across our three business areas.
REVENUES BY BUSINESS AREA
Consolidated revenues for the first quarter of 2022 were $128.4m, representing an increase of $5.0m (or 4.1%) compared to the first quarter of 2021. The higher revenues in the quarter were driven by increased work volume, primarily in our Robotics & Space Operations business. By business area, Q1 2022 revenues in Geointelligence of $48.9m were in line with prior year’s revenues for the same period reflecting steady business activity. Revenues in Robotics & Space Operations of $42.4 m in Q1 2022 represents an $8.1m (or 23.6%) increase year over year, largely driven by the higher volume of work performed on the Canadarm3 program. Revenues in Satellite Systems of $37.1m in the latest quarter were $3.0m (or -7.5%) lower compared to the first quarter of 2021 driven primarily by the timing of revenue recognition on programs.
Gross Profit and Gross Margin
Gross profit reflects our revenues less cost of revenues. First quarter 2022 gross profit of $61.7m represents a $23.3m (or 60.7%) increase over 2021, primarily attributable to higher ITCs income recognized, of which $16.8m relates to resolution of historical claims. These ITCs originated from prior years but were not recognized previously due to the uncertainty around the eligibility of the related costs. The remainder of the improvement in gross profit reflects stronger program execution and cost management across all three business areas. Q1 2022 gross margin of 48.1% compared to 31.1% in Q1 of the prior year, primarily driven by the aforementioned $16.8m resolution of historical claims as well as stronger program execution and cost management in the quarter. (Source: PR Newswire)
10 May 22. TransDigm Group Reports Fiscal 2022 Second Quarter Results.
TransDigm Group Incorporated (NYSE: TDG), a leading global designer, producer and supplier of highly engineered aircraft components, today reported results for the second quarter ended April 2, 2022.
Second quarter highlights include:
- Net sales of $1,327m, up 11% from $1,194m in the prior year’s quarter;
- Income from continuing operations of $199m, up 90% from $105m in the prior year’s quarter;
- Earnings per share from continuing operations of $3.38, up 89% from $1.79 in the prior year’s quarter;
- EBITDA As Defined of $633m, up 22% from $519m in the prior year’s quarter;
- EBITDA As Defined margin of 47.7%, up 420 basis points from the prior year’s quarter;
- Adjusted earnings per share of $3.86, up 50% from $2.58 in the prior year’s quarter; and
- Repurchase of $667m of Company stock during the quarter, equating to approximately 1.0m shares.
The Company’s full fiscal 2022 guidance remains suspended at this time as a result of the continued disruption in our primary commercial end markets. Refer to the “Fiscal 2022 Outlook” section below for further information.
Net sales for the quarter increased 11.1%, or $133m, to $1,327m from $1,194 m in the comparable quarter a year ago. Organic sales growth as a percentage of net sales was 15.1%.
Income from continuing operations for the quarter increased $94m, or 89.5%, to $199m from $105m in the comparable quarter a year ago. The increase in income from continuing operations primarily reflects the increase in net sales described above and favorable sales mix, along with lower one-time refinancing costs and lower COVID-19 restructuring costs. The increase was partially offset by a higher effective tax rate and higher stock compensation expense. The comparable quarter a year ago also included the benefit of a gain recorded on the settlement of an insurance claim.
Adjusted net income for the quarter increased 50.3% to $227m, or $3.86 per share, from $151m, or $2.58 per share, in the comparable quarter a year ago.
EBITDA for the quarter increased 26.7% to $588m from $464m for the comparable quarter a year ago. EBITDA As Defined for the quarter increased 22.0% to $633m compared with $519 m in the comparable quarter a year ago. EBITDA As Defined as a percentage of net sales for the quarter was 47.7% compared with 43.5% in the comparable quarter a year ago.
“It is encouraging that the global commercial aerospace recovery continues to steadily progress forward. As we expected, this recovery is not linear as the world experiences new COVID variants and certain countries deploy strict lockdown policies. However, despite these hurdles, the global commercial aerospace recovery is proceeding, led primarily by the pent-up demand for domestic leisure travel – though improving trends in international air traffic and business air travel are a positive,” stated Kevin Stein, TransDigm Group’s President and Chief Executive Officer. “I am very pleased to see another quarter of strong sequential improvement in our commercial aftermarket revenues and bookings, with bookings for the quarter significantly outpacing revenues. Our commercial aftermarket continues to lead the recovery of our commercial aerospace revenues, and we expect that trend to carry throughout the remainder of our fiscal 2022.
Additionally, during the quarter we returned $667m of capital to shareholders via open market repurchases of our common stock. We view these repurchases like any other capital investment, and we expect this investment will meet or exceed our long-term return objectives.”
For the quarter we had positive operating cash flow generation of $87 m. The operating cash flow for the quarter was unfavorably impacted by the timing of cash interest payments and tax payments, as well as the timing of cash receipts related to the strong sales in March.
During the thirteen week period ended April 2, 2022, TransDigm repurchased 1,046,815 shares of its common stock with a weighted-average price per share of $636.93 at an aggregate cost of approximately $667 m. As previously reported, on January 27, 2022, our Board of Directors authorized a new $2,200m stock repurchase program to replace the existing program permitting the repurchase of a portion of TransDigm’s outstanding shares. As of April 2, 2022, the remaining amount of repurchases allowed under the new program was approximately $1,533 m.
As previously reported, on March 14, 2022, TransDigm entered into a definitive agreement to acquire DART Aerospace (“DART”), a portfolio company of Greenbriar Equity Group, L.P. and First Aviation Services Inc., for approximately $360 m in cash. The acquisition is expected to close during the second half of fiscal 2022, subject to regulatory approvals and customary closing conditions. DART is an industry leader in helicopter mission equipment with established positions on a diverse range of rotary-wing platforms.
Net sales for the twenty-six week period ended April 2, 2022 increased 9.6%, or $220m, to $2,521m from $2,301m in the comparable period a year ago. Organic sales growth as a percentage of net sales was 12.0%.
Income from continuing operations for the twenty-six week period ended April 2, 2022 increased $207m, or 133.5%, to $362 m from $155 m in the comparable period a year ago. The increase in income from continuing operations primarily reflects the increase in net sales described above and favorable sales mix, along with lower COVID-19 restructuring costs and lower one-time refinancing costs, partially offset by a higher effective tax rate. The comparable period a year ago also included the benefit of a gain recorded on the settlement of an insurance claim.
GAAP earnings per share were reduced in fiscal 2022 and 2021 by $0.78 per share and $1.24 per share, respectively, as a result of dividend equivalent payments made during each year. As a reminder, GAAP earnings per share are reduced when TransDigm makes dividend equivalent payments pursuant to the Company’s stock option plans. These dividend equivalent payments are made during the Company’s first fiscal quarter each year and also upon payment of any special dividends.
Adjusted net income for the twenty-six week period ended April 2, 2022 increased 52.3% to $405m, or $6.85 per share, from $266 m, or $4.55 per share, in the comparable period a year ago.
EBITDA for the twenty-six week period ended April 2, 2022 increased 31.8% to $1,110m from $842m for the comparable period a year ago. EBITDA As Defined for the period increased 20.6% to $1,198m compared with $993m in the comparable period a year ago. EBITDA As Defined as a percentage of net sales for the period was 47.5% compared with 43.2% in the comparable period a year ago.
Please see the attached tables for a reconciliation of income from continuing operations to EBITDA, EBITDA As Defined, and adjusted net income; a reconciliation of net cash provided by operating activities to EBITDA and EBITDA As Defined, and a reconciliation of earnings per share to adjusted earnings per share for the periods discussed in this press release.
Fiscal 2022 Outlook
Given the considerable uncertainty around the extent and duration of business disruptions related to the COVID-19 pandemic and its impact on our primary commercial OEM and commercial aftermarket end markets, the Company will not provide full fiscal year 2022 guidance at this time. Information regarding fiscal 2022 EBITDA As Defined margins, expected defense market revenue growth, tax rates, interest expense, capital expenditures and select accounting information is included in the slide presentation available for today’s earnings call. (Source: PR Newswire)
10 May 22. Vectrus Announces Solid First Quarter Results
- Q1 revenue +5.2% Y/Y to $456.5m
- Operating income of $5.2m; Adjusted EBITDA margin1 of 4.0%
- Q1 fully diluted EPS of $0.24; Adjusted diluted EPS1 of $1.01
- Several key wins expand and solidify work with Army, Navy, and National Security clients
- Reiterating revenue and adjusted diluted EPS1 guidance
Vectrus, Inc. (NYSE:VEC) announced first quarter 2022 financial results.
“Vectrus reported solid first quarter results driven by the continued expansion into LOGCAP V and our focus on diversification to new clients and markets,” said Chuck Prow, Chief Executive Officer of Vectrus.
“During the quarter, revenue grew 5% year-over-year and 9% sequentially to $456 m. Revenue growth was driven by the continued phase-in of LOGCAP V, high op-tempo in the regions we operate in support of ongoing world affairs, as well as the progress made in executing growth in our core programs,” said Prow. “With a continued focus on the needs of our clients, the Vectrus team supported several important missions during the quarter, including assisting the DoD with the establishment of a water supply system and water remediation efforts in Hawaii. In addition, we demonstrated our ability to transition quickly and recently became fully operational on LOGCAP V Kwajalein, approximately a month and a half ahead of schedule. We also leveraged our process-oriented phase in system and in a short period of time, achieved full operations at Ft. Benning following our December 2021 $250 m award. We are proud of this achievement and look forward to providing world class maintenance, transportation, and supply services for the US Army’s Maneuver Training Center over the next five years.”
“Notably, late in the first quarter Vectrus was awarded a strategically important task order to provide support for the U.S. Air Force in Europe as part of the European Deterrence Initiative,” said Prow. “While currently small in value, this contingency task is providing mission critical services to our Air Force client in Europe. This effort exemplifies our global positioning and rapid response capabilities supporting our clients’ most challenging and important missions.”
Prow continued, “Adjusted EBITDA for the quarter was $18.2m or 4.0% margin as we work through program efficiencies in the early phases of LOGCAP V implementation. Additionally, LOGCAP V is generating higher revenue volume with a greater amount of material and pass-through content that has a different margin complexion.”
“We are continuing our positive momentum working with the Navy and during the first quarter were selected to complete the final phases of application development for the 5G Naval Base Coronado Smart Warehouse, which is demonstrative of our ability to provide converged solutions and operational technologies to clients,” said Prow. “We were also recently awarded the follow-on contract for Spectrum Management with the Navy valued at $60 m. This award continues more than 30 years of support to the Navy in solving afloat electromagnetic interference and compatibility challenges for the fleet. Furthermore, Vectrus won a position on a $250m five-year IDIQ vehicle that provides rapid development, prototyping, and systems integration to the Navy, Joint, and coalition forces worldwide utilizing numerous platforms and integrated capabilities. Vectrus will focus on embarkable systems that include cyber hardening, new technology insertion and retrofit of existing systems. In addition, we won an effort as subcontractor performing electromagnetic test and evaluation engineering. These are key wins that demonstrate our capabilities in engineering and operational technology, and our commitment to delivering a more integrated and comprehensive suite of solutions in support of the converged environment,” Prow elaborated.
Prow continued, “Vectrus has worked diligently over the past several years to expand its presence with national security clients and, during the first quarter our teams were successful in securing several wins that enhance our footprint in the intelligence community.”
Prow concluded, “Our first quarter results demonstrate Vectrus’ realization and execution of our strategy to strengthen and grow the business through outstanding program execution, capability expansion, and diversification of our geographic and client footprint.”
First Quarter 2022 Results
First quarter 2022 revenue of $456.5m was up $22.5m year-on-year. “Revenue grew 5.2% year over year boosted by our transition to full operational capability on LOGCAP V programs in Iraq and Kuwait late last year, and Kwajalein this year. In addition, revenue benefitted from transitioning Ft Benning and volume associated with rapid response and contingency efforts,” said Susan Lynch, Senior Vice President and Chief Financial Officer. “This revenue growth was impressive given the headwinds associated with the withdrawal of the US military from Afghanistan,” added Lynch. Operating income was $5.2 m or 1.1% margin. This includes M&A and integration related expenses of $9.1 m and amortization of acquired intangible assets of $2.3 m which were incurred in the quarter.
Adjusted operating income1 was $16.6m or 3.6% margin. Adjusted EBITDA1 was $18.2m or 4.0% margin as compared to $20.7 m or 4.8% in the prior year. “The year-on-year margin change was influenced by the significant amount of revenue and contracts that are in the early stages of their lifecycle. We believe margin on these contracts will improve over time as we apply our process improvement and Enterprise Vectrus initiatives. In addition, as we continue to support our LOGCAP V clients’ supply chain needs, we are experiencing an increase in material and pass-through content which carries a lower margin. In aggregate, on average and over time we expect to see improvement in the margin profile as we drive operational efficiencies and diversify into higher margin scopes of work,” said Lynch.
Fully diluted EPS for the first quarter of 2022 was $0.24 as compared to $1.02 in the prior year. Fully diluted EPS in the quarter included the aforementioned M&A and integration related costs. Adjusted diluted EPS1 was $1.01 in the quarter as compared to $1.20 in the prior year. The change in adjusted diluted EPS1 was primarily due to the above-mentioned change in Adjusted EBITDA1.
Cash used in operating activities through April 1, 2022, was $26.4m, compared to net cash used in operating activities of $21.7m through the first quarter of 2021. Cash used in operating activities was negatively impacted in the current quarter by an approximately $8.0m repayment of CARES Act tax deferrals and $2 m of merger related payments.
Net debt on April 1, 2022, was $96.8m, down $41.9m from April 2, 2021. Total debt on April 1, 2022, was $119.8m, down $57.2m from $177.0m on April 2, 2021. Cash at quarter-end was $23.0m. Total consolidated indebtedness to consolidated EBITDA1 (total leverage ratio) was 1.4x compared to 2.0x at the same time last year.
Total backlog as of April 1, 2022, was $4.5bn representing almost 2.5x the company’s estimated 2022 revenue mid-point. Funded backlog was $0.8bn. The trailing twelve-month book-to-bill was 1.0x as of April 1, 2022.
Lynch continued, “In light of our solid first quarter performance, we are reiterating our full-year 2022 guidance ranges for revenue and adjusted EBITDA, adjusted diluted EPS, and net cash provided by operating activities, excluding M&A related activities.”
Due to the merger activities with Vertex, the company is not providing GAAP guidance or a reconciliation of forward-looking measures including adjusted diluted EPS to GAAP diluted EPS or adjusted EBITDA margin to GAAP net income due to the difficulty in forecasting the transaction timing and quantifying certain amounts that are necessary for such reconciliation. Reconciliations to the closest corresponding U.S. GAAP measures are not available without unreasonable efforts on a forward-looking basis due to the high variability, complexity and low visibility with respect to the charges excluded from these non-GAAP measures. The variability of such charges could potentially have a significant impact on our future U.S. GAAP financial results. (Source: PR Newswire)
12 May 22. Seraphim Space Investment Trust plc (LSE: SSIT), the world’s first listed SpaceTech Fund, announces its third quarter results for the three-month period ending 31 March 2022.
The full Q3 report can be found at here with a summary below:
Q3 Financial Highlights as at 31 March 2022
- Net assets broadly flat at £250m (vs. £251m previous quarter)
- Slight decrease in net asset value (NAV) per share from 105p to 104p driven by the impact of weak equity markets on the value of listed portfolio companies, principally Arqit, partially offset by the uplift in unlisted portfolio holdings, principally D-Orbit
- Portfolio value of £188m (vs. £183m previous quarter)
- Portfolio fair value stands at 110% of cost
- Liquid resources available of £62m (25% of NAV)
Q3 Investment Highlights
- £6.5 m additional capital deployed across four transactions
- Two new additions to the portfolio bringing portfolio to 23 companies
Post Period Highlights
- Investment activity remains high despite market turbulence. Terms have been agreed on several new investments which, subject to the satisfactory completion of due diligence, are expected to complete during the Q4 period to 30 June 2022.
- Areas of current focus include businesses with climate and environmental related applications.
- Fundraising activity within the existing portfolio remains robust with multiple follow-on transactions at an advanced stage.
- Continued expansion of the portfolio over forthcoming quarters is expected, whilst remaining mindful of the ongoing funding requirements of the existing portfolio.
- New Venture Partner Patrick McCall was engaged on 1 May 2022. He was previously chair of Virgin Galactic and Virgin Orbit, having spent 20 years with the Virgin Group. His main role will be to use his operational experience to guide and assist SSIT portfolio companies.
Capital Markets Day
The Company will be hosting a Capital Markets Day in London for institutional investors and equity analysts at 10am today. Institutional investors and equity analysts can register for the in-person event by contacting Deutsche Bank/J.P. Morgan Cazenove or by emailing SEC Newgate at .
Will Whitehorn, Chair of Seraphim Space Investment Trust plc, commented: “Like many pioneering technology companies, SSIT and its listed holdings were not immune to the broader world-wide sell-off of technology and growth stocks, precipitated by rising interest rates, global energy prices, high inflation and Russia’s war in Ukraine.
However, we are increasingly optimistic about the Company’s prospects. The fundamentals of the SpaceTech market opportunity remain robust, while the SSIT portfolio still shows a 10% uplift versus cost as at 31 March 2022.
Meanwhile, the role of SpaceTech in addressing some of the world’s most urgent problems has never been greater. As well as addressing the climate crisis, the sector is also now playing a crucial role in helping to combat Russian aggression in Ukraine, with several of the Company’s portfolio companies at the forefront of these efforts. Space is where society has made some of its most brilliant discoveries and greatest achievements. In these troubling times we are all living in, it is once again to the stars that we must look to for answers to our greatest challenges.”
Mark Boggett, Chief Executive Officer, Seraphim Space Manager LLP, said: “We remain satisfied with the performance of the Company and its portfolio. Since IPO, we have deployed a total of £142.3m into 14 companies through a blend of cash investments and additional share issuances. The Company’s stable performance for the period is reflective of the strong underlying condition of the portfolio. Most companies are well capitalised and tracking positively against our expectations. With capital reserves of £62m, the Company remains well placed to continue delivering against its objectives.”
“Although listed SpaceTech companies, along with listed technology companies in general, have seen their share prices fall in recent months, activity levels in the private capital markets remain high. The last year has seen a steady increase in the number of privately financed SpaceTech transactions closed each quarter, with more than $12bn invested during the 12 months to 31 March 2022. These trends have been reflected in recent portfolio performance, with reductions in the value of listed holdings being offset by gains in private holdings. We are confident our holdings will continue to deliver against the very significant opportunities the Space sector presents.”
11 May 22. UVision invests in SpearUAV, becoming a shareholder in the company. This investment is another step in the expansion of UVision into the unmanned systems market. UVision Air Ltd. – a global leader in aerial loitering munition systems of all sizes for a variety of missions revealed its strategic investment in SpearUAV, who have developed an autonomous, AI-based technology for encapsulated SWARM-based UASs.
The two companies will work to share their technological knowledge: UVision with its proven knowledge and experience in loitering munition systems, and Spear with its expertise in AI based tactical drones for ISTAR missions. The synergy between the companies will make it possible to offer a comprehensive solution for varying operational needs from the micro-tactical forces and brigade level, to the division level.
“This investment in Spear comes as a direct continuation of the company’s expansion in the international defense market,” says Major General (Ret.) Avi Mizrachi, CEO of UVision. “Just recently, UVision was selected by the U.S. Marines to provide its advanced loitering munition system, Hero-120, as part of a multi-year installation for all armored vehicles. Spear offers a unique ISTAR solution that can be easily deployed by any soldier in the field. Together, we are creating a broad-spectrum solution, tailored to any operational need of our customers – at sea, in the air, and on land.”
“We are pleased and proud of our strong partnership with UVision,” says Colonel (Ret.) Gadi Kuperman, Founder & CEO of SpearUAV. “UVision has recognized the enormous potential of Spear’s robust, intuitive, and autonomous solutions for immediate, aerial superiority, in both the defense and HLS markets. While Spear continues to thrive and grow independently, we are confident that this collaboration will bring with it a breakthrough into new markets for the two companies.”
10 May 22. North American PAL hovers at Cobham’s special missions. North American aerospace and defence company PAL Aerospace is considering touching down in Australia via Cobham Aviation’s up-for-sale special missions unit. Street Talk understands PAL Aerospace is one of a small handful of parties running the numbers on Cobham’s special missions business, keen to work up a binding offer to put to Cobham’s owner via investment bank Macquarie Capital.
Cobham’s special missions unit’s biggest customers included the Australian Border Force and Department of Defence.
PAL Aerospace is based in Canada, owned by Exchange Income Corporation and specialises in intelligence, surveillance and reconnaissance, working for governments in North America and further afield.
The company has a presence in Australia, via an affiliation with Air Affairs Australia, signed a few years ago and targeting special mission opportunities within Australia and the Pacific region.
However, its appetite is understood to have increased substantially and it’s now trying to acquire Cobham’s special missions, which is a long-term provider of aviation services to the Australian government.
Cobham’s special missions was expected to record $180 m revenue in the 2022 financial year, according to a pitch sent to potential acquirers in February, was operating at a 43 per cent margin, had a $1 bn backlog of work, 350 employees and 14 “highly modified” aircraft.
The bulk of its revenue ($140 m) was slated to be from Australian Border Force in FY22.
Cobham’s private equity owner has MacCap running an auction for the business, as well as Cobham’s Australian fly-in fly-out charter flights arm.
Special missions’ bidders, including PAL Aerospace, are sure to attract close scrutiny from Australia’s government given the sensitive nature of its work. The unit has a 25-year relationship with the Australian government and close links with key decision makers. Bankers and lawyers reckon it’s the sort of business that could only be owned by a member of the Five Eyes intelligence alliance, which includes Australia, the US, Canada, New Zealand and the United Kingdom. PAL Aerospace fits the bill. (Source: Google/https://www.afr.com/street-talk)
10 May 22. Patria’s vehicle projects are successful, and internationalization continues as planned.
- Patria Group’s net sales for the first quarter was EUR 131.6m (EUR 119.5m in 2021).
- Operating profit was EUR 8.4m (4.9).
- Equity ratio was 43.0% (39.6%) and net gearing 45.8% (68.0%).
- Patria successfully introduced a new operating model in line with the growth strategy in the beginning of this year.
- The Finnish Defence Forces signed an agreement with Patria to acquire Patria 6×6 vehicles as a pre-series related to the joint 6×6 vehicle programme between Latvia, Finland, Estonia and Patria. Sweden is also preparing to join the programme.
- The Government of the Slovak Republic announced Patria to be the winner of the tender for BOV 8×8 programme. The decision was based on bids submitted at the end of 2021, as well as vehicle and weapon system tests carried out in February 2022.
- The Swedish Defence Materiel Administration (FMV) awarded a contract to Patria for upgrade of Patria XA 202/203 (Patgb 202/203) wheeled armoured vehicles. In total 168 vehicles will be refurbished.
- Patria acquired NEDAERO, a leading Dutch specialist in defence and aerospace components and parts.
- Patria and Pratt & Whitney signed a Letter of Intent to deepen their ongoing long-term cooperation related to the F100-PW-220/220E and F100-PW-229 military jet engines operational in the F-16 and F-15 combat aircraft. The aim is to maintain and develop the existing relationship in support of maintenance, repair and overhaul logistics for worldwide F100 customers.
- Patria, Millog and Insta Group delivered first aid and hospital supplies to the Ukrainian cooperation partner with a joint procurement valued at around EUR 100,000.
Outlook for the rest of the year
Patria continues to strengthen its operational efficiency and financial performance based on its growth strategy. Patria’s reliable and cost-effective lifecycle support services and top-notch products have a key role also in the future to maintain the required performance of customers’ fleets in all conditions.
With the F-35 decision, negotiations on industrial cooperation intensify within the selected machine type.
The joint programme of the Patria 6×6 vehicle is proceeding as planned. In Latvia, the first vehicles are already in use and serial production is underway. A pre-series order with Finland has been agreed, and Sweden is preparing to join the programme. It is also foreseen that the joint programme will be of interest to other countries wishing to improve mobility of their armed forces.
10 May 22. Maxar reports $7m loss in first quarter earnings.
Maxar Technologies on Monday reported a loss of $7m in its first quarter.
On a per-share basis, the Westminster, Colorado-based company said it had a loss of 10 cents.
The results exceeded Wall Street expectations. The average estimate of three analysts surveyed by Zacks Investment Research was for a loss of 12 cents per share.
The satellite company posted revenue of $405m in the period.
Multiple media organizations use Maxar’s satellite imagery in their reporting, notably to show activity in Ukraine as it defends itself against a Russian invasion. Other examples include:
- New Chinese radar looks toward Japan, satellite image shows
- How one US intelligence agency is supporting Ukraine
- Satellite images track new Russian military deployments near Ukraine
- Satellite photos show chaos in Afghanistan exit
(Source: Defense News)
09 May 22. BWX Technologies Reports First Quarter 2022 Results.
- Generates 1Q22 GAAP earnings of $0.64 per share, non-GAAP(1) earnings of $0.69 per share
- Produces 1Q22 GAAP net income of $59.0m and adjusted EBITDA(1) of $94.4m
- Completes Tc-99m equipment testing, setting the stage for FDA registration batches
- Closes acquisition to expand and enhance core naval nuclear manufacturing business by adding highly-engineered, proprietary valves, manifolds and fittings for global shipbuilding
- Reiterates 2022 guidance
BWX Technologies, Inc. (NYSE: BWXT) (“BWXT”, “we”, “us” or the “Company”) reported first quarter 2022 revenue of $531m, a slight increase compared with $528m in the first quarter 2021. GAAP net income for the first quarter 2022 was $59.0m, or $0.64 per diluted share, compared with GAAP net income of $69.7m, or $0.73 per diluted share, in the prior-year period. Non-GAAP(1) net income for the first quarter 2022 was $63.0m, or $0.69 per diluted share. Consolidated adjusted EBITDA(1) for the first quarter 2022 was $94.4m, a 4% decrease compared with the prior-year period of $98.3m, primarily driven by lower recoverable CAS pension income and fewer favorable contract adjustments due to lower productivity in the naval reactors business. A reconciliation of non-GAAP results are detailed in Exhibit 1.
“BWXT demonstrated consistent operational and financial performance in the first quarter of the year and moved forward on strategic growth initiatives,” said Rex D. Geveden, president and chief executive officer. “BWXT delivered its final design for the Pele transportable microreactor to the Department of Defense and completed a comprehensive series of hot runs to fully test and optimize the new Tc-99m generator manufacturing line, setting the stage for final characterization runs and reference batches.”
“In April, we also closed a small, but strategic acquisition that expands and enhances our core mission in global security. These two acquired businesses provide additional market access to expanding nuclear and non-nuclear naval and commercial markets through the sale of highly engineered proprietary valves, manifolds and fittings and enhanced-emission maritime offerings. The acquisition will also establish a global footprint for BWXT with concentrations in the U.S. and U.K. maritime markets, which we view as increasingly important, especially given the present state of global security,” said Geveden.
Government Operations segment revenue was $432 m for the first quarter 2022, a 2% increase compared with the prior-year period, driven by higher long-lead material volume in naval reactors, higher revenue in uranium processing and higher revenue in advanced technologies related to microreactors, partially offset by lower missile tube revenue. Government Operations segment operating income was $72.2m in the first quarter 2022, an 8% decrease compared with the prior-year period. Government Operations segment adjusted EBITDA(1) was $84.7m in the first quarter 2022, a 3% decrease compared with the prior-year period, primarily driven by lower recoverable CAS pension income and fewer favorable contract adjustments due to lower productivity in the naval reactors business, partially offset by higher volume.
Commercial Operations segment revenue was $100m for the first quarter 2022, a 7% decrease from the prior-year period, driven by lower commercial nuclear power field services, partially offset by higher commercial nuclear power fuel handling revenue and higher BWXT Medical revenue. Commercial Operations segment operating income was $4.0m in the first quarter 2022, a $2.3m decrease from the prior-year period. Commercial Operations segment adjusted EBITDA(1) was $10.7m in the first quarter 2022, a 5% decrease compared with the prior-year period, primarily driven by lower revenue.
Cash and Capital Returned to Shareholders
BWXT utilized $5.4m of net cash in operating activities in the first quarter 2022, compared with $98.4m of net cash generated from operating activities in the prior-year period, which can be largely explained by an $88.7m cash receipt that typically would have been received prior to the 2020 year-end but occurred in the first quarter of 2021. The Company’s cash balance, net of restricted cash, was $23.6m at the end of the first quarter 2022.
The Company returned $40.7m of cash to shareholders during the first quarter 2022, including $20.0m in share repurchases and $20.7m in dividends. As of March 31, 2022, total remaining share repurchase authorization was $398m.
On May 3, 2022, the BWXT Board of Directors declared a quarterly cash dividend of $0.22 per common share. The dividend will be payable on June 8, 2022, to shareholders of record on May 20, 2022.
BWXT reiterated all components of 2022 guidance
- Revenue up 3% to 4% vs. 2021
- Adjusted EBITDA up 3% to 4% vs. 2021
- Non-GAAP EPS: $3.05 to $3.25
- Cash from operations: $260m to $290m
- Capital expenditures: $180m to $200m
The Company does not provide GAAP guidance because it is unable to reliably forecast most of the items that are excluded from GAAP to calculate non-GAAP results. These items could cause GAAP results to differ materially from non-GAAP results. See reconciliation of non-GAAP results in Exhibit 1 for additional information.
A reconciliation of non-GAAP results, including adjusted EBITDA, are detailed in Exhibit 1. Additional information can be found in the materials on the BWXT investor relations website at www.bwxt.com/investors. (Source: BUSINESS WIRE)
08 May 22. Defence companies face supply snags as demand for US weapons rises. American aerospace groups could struggle to scale up production in the wake of the Ukraine war. Northrop Grumman chief executive Kathy Warden delivered good news and bad news: the aerospace group expects more demand for its weapons systems, but supply chain issues could hinder efforts to expand production. “Right now, it’s a question of how do we scale production to backfill stockpiles?” Warden said at the Economic Club of Washington, DC on Wednesday. She has also acknowledged labour shortages. The largest US aerospace defence contractors are due for a windfall as western governments recalibrate their security strategies and increase defence spending following the Russian invasion of Ukraine. The chief executives of Lockheed Martin, Raytheon Technologies, Boeing, Northrop Grumman and General Dynamics — prime contractors for the US Department of Defense — acknowledged in April earnings calls that they will profit from increased defence spending. Stock prices for Lockheed, Northrop Grumman and General Dynamics are up 12 to 15 per cent since the start of the war. Contractors are now expected to ramp up production to meet demand from both the US and European governments, which have renewed commitments to defence spending due to the war. But the companies have supply chain issues, labour constraints and inflationary pressures that could hold back efforts to scale up production. Raytheon chief executive Greg Hayes told analysts that finding new, non-Russian sources of titanium has proved difficult, and that the Stinger will need an electronic redesign since “some of the components are no longer commercially available”. Stingers and Javelins, both shoulder-fired missiles, have become the emblematic weapons of the Ukraine conflict as the country’s soldiers employ them to beat back Russian forces. US president Joe Biden travelled to a Lockheed plant in Alabama on Tuesday to tout the Javelin. The US has committed over 5,500 Javelins to Ukraine. An estimated quarter of the US’s Stinger stockpile has gone to Ukraine, according to Mark Cancian, a former Pentagon official now at the Center for Strategic and International Studies, a think-tank. But the Stinger is produced at negligible levels — there is only one active international customer and the US has not bought one for 18 years. Hayes said large orders are not expected until 2023 or 2024 as “we have a very limited stock of material for Stinger production”. A similar timeline is expected for Javelin orders, added Hayes. It could take two years to get Javelin production up to its maximum of 6,000 per year, said Cancian. Raytheon and Lockheed produced 866 Javelins for $207.2m for the US in 2021; the Pentagon wants 586 for $189.3m in 2023. (Source: FT.com)
06 May 22. Magellan Aerospace Corporation Announces Financial Results. Magellan Aerospace Corporation (“Magellan” or the “Corporation”) released its financial results for the first quarter of 2022. All amounts are expressed in Canadian dollars unless otherwise indicated. The results are summarized as follows:
Three month period ended
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 to Business
The COVID-19 pandemic continued to disrupt global health and the economy and has created an indeterminate period of volatility in the markets in which Magellan operates. The COVID-19 pandemic impacted Magellan’s operations at varying times by way of reduced production, either by its customers’ build rate adjustments or due to a broader government directive which resulted in the need to modify work practices to meet appropriate health and safety standards, or by other COVID-19 related impacts on the availability of labour or to the supply chain. While governments have eased some COVID-19 restrictions, the reopening of businesses and economies in certain countries is creating a variety of new challenges, including, for example, higher prices for goods and services, limited availability of products, disruptions to supply chains and labour shortages. Magellan continues to monitor ongoing developments and mitigate risks related to the COVID-19 pandemic and the impact on Magellan’s operations, supply chain, and most importantly the health and safety of its employees.
The invasion of Ukraine by Russia has resulted in sanctions imposed upon Russia which are expected to impact world economic markets and particular areas of the aerospace industry. The extent and potential magnitude of economic impacts on the aerospace industry as a result of the imposed sanctions is still being assessed by the industry. The Corporation, through certain of its customers, participates on certain commercial aircraft programs that are manufactured by Russian companies, and the Corporation indirectly supplies components for aircraft engines which are sold to Russian aircraft manufacturers. Magellan also purchases raw materials from OEM designated suppliers that are situated in Russia. The short and long-term implications of this war on the Corporation are difficult to predict at this time.
On April 26, 2022, Magellan announced that it had signed a long-term agreement with General Electric Aviation (“GE”) for the repair and overhaul (R&O) of major components for the GE F414-GE-400 engine, which powers Boeing’s F/A-18 Block III Super Hornet fighter jet. Finished components will be delivered from Magellan’s facility in Winnipeg, Manitoba. The five-year agreement is the latest milestone in a strong and continuing relationship between the companies that dates back more than 50 years.
On May 2, 2022, Magellan announced it has reached a five-year agreement with Safran Landing Systems to manufacture complex machined landing gear components. The agreement includes the continued manufacture and processing of Magellan’s current work statement and additional new components, all for commercial aircraft platforms. Deliveries will take place from Magellan’s North American facilities in New York, New York and Kitchener, Ontario.
For additional information, please refer to the “Management’s Discussion and Analysis” section of the Corporation’s 2021 Annual Report available on www.sedar.com.
- Results of Operations
A discussion of Magellan’s operating results for the first quarter ended March 31, 2022
The Corporation reported revenue in the first quarter of 2022 of $187.7m, a $11.4m increase from the first quarter of 2021 revenue of $176.3m. Gross profit and net loss for the first quarter of 2022 were $10.9m and $2.8m, respectively, in comparison to gross profit of $17.1m and net income of $3.3 m for the first quarter of 2021.
Revenues in Canada increased 4.6% in the first quarter of 2022 compared to the corresponding period in 2021, primarily due to increased volumes for proprietary and casting products, offset in part by lower repair and overhaul revenues.
Revenues in the United States decreased by 1.9% in the first quarter of 2022 compared to the first quarter of 2021, largely due to volume decreases for castings, repairs and wide-body aircraft products, specifically the Boeing 787 when deliveries had been halted, offset in part by increased volume for single aisle aircraft as Boeing continued to ramp up production for 737 MAX.
European revenues in the first quarter of 2022 increased 17.3% compared to the corresponding period in 2021 primarily driven by volume increases for single aisle aircraft, and the favourable foreign exchange impact as the United States dollar strengthened relative to the British pound.
Gross profit of $10.9m for the first quarter of 2022 was $6.2m lower than the $17.1m gross profit for the first quarter of 2021, and gross profit as a percentage of revenues of 5.8% for the first quarter of 2021 decreased from 9.7% recorded in the same period in 2021. The gross profit in the current quarter was primarily impacted by volume decreases for certain programs, higher material and manufacturing production costs, production inefficiencies and unfavourable product mix. During the first quarter of 2022, certain facilities of the Corporation continued to experience supply chain disruptions and labour shortages, which resulted in lower absorption of manufacturing costs and higher production costs.
Administrative and General Expenses
Administrative and general expenses as a percentage of revenues of 6.8% for the first quarter of 2022 were higher than the same period of 2021. Administrative and general expenses increased $1.2m or 10.0% to $12.8m in the first quarter of 2022 compared to $11.6m in the first quarter of 2021 mainly due to increases in salary and related expenses for inflationary rate and headcount changes, travel and accommodation as travel restrictions were lifted, consulting and IT expenses due to timing of spending.
Total interest expense of $0.7m in the first quarter of 2022 decreased $0.2m compared to the first quarter of 2021 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 as the Corporation wound down its accounts receivable securitization program in March 2021. (Source: Google/BUSINESS WIRE)
06 May 22. Astronics Corporation Reports 2022 First Quarter Financial Results.
- Sales for the quarter were $116.2m, up 10% over prior-year period
- Pretax income was $5.0m, up from a loss of $11.8m in the prior-year period
- Bookings totaled $175.6m, up 46% over prior-year period; Achieved book-to-bill ratio of 1.51
- Backlog increased 14% from year end 2021 to a record $475.1m; Aerospace backlog reached a record $394.0m
Astronics Corporation (Nasdaq: ATRO) (“Astronics” or the “Company”), a leading supplier of advanced technologies and products to the global aerospace, defense and other mission critical industries, today reported financial results for the three months ended April 2, 2022.
Peter J. Gundermann, Chairman, President and Chief Executive Officer, commented, “We continue to see very strong demand from our customers, with the first quarter being our second consecutive quarter with a book-to-bill ratio above 1.5x. In fact, our book-to-bill ratio for the trailing twelve months was 1.4x. This strong demand is encouraging as it clearly indicates recovery in our markets and enthusiasm for our products. We expect this demand will drive growth throughout the remainder of 2022.”
He continued, “However, our operating environment remains very challenging, especially with respect to our supply chain. Our sales were up 10% over last year, but could have been much higher were it not for supply chain challenges which caused about $15m in revenue to slide out of the quarter. These orders were not lost and will remain in backlog until the required raw materials arrive.”
First Quarter 2022 Results (compared with the prior-year period, unless noted otherwise)
Consolidated sales were up $10.3m from the first quarter of 2021. Aerospace sales were up $20.0m, or 24.5%, and Test System sales decreased $9.7m. While demonstrating some improvement, sales continued to reflect the ongoing impacts of the COVID-19 pandemic on the global aerospace industry. Supply chain pressures continue to impact delivery schedules and costs, limiting the Company’s ability to respond to desired requests from customers and delaying shipments.
In 2021, the Company was awarded a grant of up to $14.7m as part of the Aviation Manufacturing Jobs Protection (“AMJP”) Program. The grant has been recognized ratably over a six-month period of performance. In the first quarter of 2022, $6.0m was recognized as an offset to cost of products sold. The period of performance concluded in March 2022.
Consolidated operating loss improved measurably over the prior-year period as higher volume reflecting improvements in the commercial aerospace industry and the benefit of the AMJP helped to offset higher costs for inventory and labor.
In March 2022, the Company agreed with the earnout calculation from the buyer of its former semiconductor test business, for an earnout in the amount of $11.3m related to performance in calendar 2021. The Company recorded the gain and received the payment in the first quarter of 2022. The semiconductor test business was sold in 2019.
The effective income tax rate was 161.7% for the quarter. In the past, research and development costs were deducted as incurred. However, beginning with the 2022 tax year, these costs are required to be capitalized for tax purposes and amortized over 5 years. The tax rate was also impacted by a valuation allowance applied against the associated deferred tax asset created by the new treatment, due to the Company’s cumulative losses over the last three years.
Consolidated net loss was $3.1m, or $0.10 per diluted share, compared with net loss of $11.9m, or $0.39 per diluted share, in the prior year.
Consolidated adjusted EBITDA loss was $0.4m, or 0.3% of consolidated sales, compared with an adjusted EBITDA loss of $0.5m, or 0.5% of consolidated sales, in the prior-year period.
Sequentially, compared with the fourth quarter of 2021, while revenue remained consistent, net loss was $3.1m compared with net income of $1.6m, due to the $8.1m income tax expense in the first quarter of 2022 compared with the $1.8m income tax benefit in the fourth quarter of 2021. Adjusted EBITDA loss improved to $0.4m in the first quarter of 2022 from an adjusted EBITDA loss of $0.8m in the trailing fourth quarter.
Bookings were $175.6m in the quarter resulting in a book-to-bill ratio of 1.51:1. Backlog at the end of the quarter reached a new record level of $475.1m. Approximately $364.3m, or 77%, of backlog is expected to ship in the remainder of 2022.
Aerospace Segment Review (refer to sales by market and segment data in accompanying tables)
Aerospace First Quarter 2022 Results (compared with the prior-year period, unless noted otherwise)
Aerospace segment sales increased $20.0m, or 24.5%, to $101.4m. Commercial aerospace sales increased 67.7%, or $25.9m, and drove the improvement. Sales to this market were $64.1m, or 55.1% of consolidated revenue in the quarter, compared with $38.2m, or 36.1% of consolidated revenue in the first quarter of 2021. Improving domestic airline travel, increased narrowbody production rates including the 737 MAX, and higher fleet utilization are driving increased demand for Astronics’ products.
General Aviation sales increased $1.8m, or 13.1%, to $15.9m as higher demand in the business jet market for antenna and airframe power products offset lower VVIP activity. The Company expects the strong demand being realized in the business jet industry to translate into higher demand for its products as OEM production levels increase.
Military Aircraft sales decreased $6.0m, or 28.6%, to $15.0m. The prior-year period benefited from incremental non-recurring engineering revenue associated with development of new programs and higher sales of lighting and safety products.
Aerospace segment operating profit was $3.1m compared with operating loss of $5.6 m for the same period last year. The improvement was driven by increased sales and the $6.0m AMJP benefit, partially offset by a $0.8m increase of expense associated with a reinstated 401K contribution accrual.
Aerospace bookings in the first quarter of 2022 were $160.8m for a book-to-bill ratio of 1.59:1. Bookings were up 9% sequentially over the fourth quarter of 2021 and up 60% over the comparator quarter of 2021, continuing the strong trend of improvement since the pandemic took hold. Backlog for the Aerospace segment was a record $394.0m at the end of the first quarter of 2022.
Mr. Gundermann commented, “Demand has been very strong across our aerospace product range, with a book-to-bill of 1.48 over the last twelve months and a record high backlog at the end of the first quarter. Most of this demand has been driven by recovery in the narrowbody market. Encouragingly, in the first quarter we saw signs that the widebody market is picking up also, which is necessary for us to get back to pre-COVID levels in the near future.”
Test Systems First Quarter 2022 Results (compared with the prior-year period, unless noted otherwise)
Test Systems segment sales were $14.8m, down $9.7m compared with the prior-year period driven by lower defense revenue.
Test Systems operating loss was $1.8m, or 12.1% of sales, compared with operating profit of $1.2m, or 4.9% of sales, in the first quarter of 2021. Operating loss in the first quarter of 2022 was negatively affected primarily by lower volume.
Bookings for the Test Systems segment in the quarter were $14.8m, for a book-to-bill ratio of 1:1 for the quarter. Backlog was $81.1m at the end of the first quarter of 2022.
Mr. Gundermann noted, “The first quarter was one of treading water for our Test business, with light shipments and bookings. We are pursuing some significant projects which are scheduled for award mid-year. Those awards will largely determine the trajectory of the business through the end of 2022 and into 2023.”
Liquidity and Financing
Cash on hand was $24.0m at the end of the quarter. Net debt was $113.0m, compared with $133.2m at the end of 2021. During the first quarter, the Company received $22.0m in earnout payments from the sale of its semiconductor business, $9.2m in tax refunds, and $5.2m related to the AMJP. The Company expects to receive a final installment of $2.1m from the AMJP later in 2022.
On March 1, 2022, the Company entered into an amended and extended revolving credit facility with its bank group. The purpose of the amendment was to extend the scheduled expiration of the agreement from February 16, 2023 to May 30, 2023. The Company was in compliance with its financial covenants as of April 2, 2022. The extension also provides for more time to demonstrate economic recovery from the severe downturn in the Aerospace industry before executing a new longer-term financing agreement.
Based on Astronics’ financial projections, the Company expects to be compliant with its financial covenants for the duration of the agreement.
Astronics intends to replace the amended agreement with a new long-term financing facility in the coming months.
Mr. Gundermann commented, “We are maintaining our previous revenue guidance of $550m to $600m for the year. We believe this range accommodates the supply chain and labor challenges that we are likely to face, although some unpredictability certainly exists. Our first quarter sales were obviously not on the required pace, so we expect volume to ramp as we move through the year. We expect revenue in the second quarter will be between $125m and $135m, with similar rates of improvement in the third and fourth quarters.”
Planned capital expenditures for 2022 are expected to be approximately $15m to $20m. (Source: BUSINESS WIRE)
06 May 22. First quarter earnings for simulation firm Ansys beat expectations. Engineering simulation specialist Ansys on Wednesday reported first-quarter earnings of $71m.
On a per-share basis, the Canonsburg, Pennsylvania-based company said it had net income of 81 cents. Earnings, adjusted for one-time gains and costs, came to $1.36 per share.
The results beat Wall Street expectations. The average estimate of six analysts surveyed by Zacks Investment Research was for earnings of $1.14 per share.
The maker of engineering-simulation software posted revenue of $425.1m in the period. Its adjusted revenue was $428.6m, also topping Street forecasts. Four analysts surveyed by Zacks expected $406.4m.
For the current quarter ending in July, Ansys expects its per-share earnings to range from $1.46 to $1.64. Analysts surveyed by Zacks had forecast adjusted earnings per share of $1.83.
The company said it expects revenue in the range of $450m to $475m for the fiscal year’s second quarter. Analysts surveyed by Zacks had expected revenue of $485.5m. Ansys expects full-year earnings in the range of $7.53 to $7.94 per share, with revenue ranging from $2.01bn to $2.07bn.
Ansys shares have fallen 28% since the beginning of the year. In the final minutes of trading on Wednesday, shares hit $288.71, a decrease of 18% in the last 12 months. (Source: Defense News)
06 May 22. Satellite comms firm Telesat unveils first-quarter earnings. The satellite communications firm Telesat on Friday reported earnings of $11m in its first quarter. The Ottawa, Ontario-based company said it had net income of 89 cents per share. The company posted revenue of $146.7m in the period. Telesat expects full-year revenue in the range of $568.4m to $584.2m. (Source: Defense News)
06 May 22. Satellite service provider EchoStar posts Q1 earnings. EchoStar Corp. on Thursday reported earnings of $91.4m in its first quarter. The Englewood, Colorado-based company said it had net income of $1.06 per share. Earnings, adjusted for investment gains, came to 32 cents per share. The company, which sells set-top boxes and provides satellite services, posted a revenue of $501.5m in the period. (Source: Defense News)
06 May 22. Huntington Ingalls Industries’ Q1 revenues jump 13.1% to $2.6bn. US-based military shipbuilding company Huntington Ingalls Industries (HII) has reported revenues of $2.6bn in the first quarter of this year. The figure represents an increase of 13.1% year-over-year (Y-o-Y) from $2.28bn recorded a year ago. In the three-month period that ended on 31 March 2022, the company’s net earnings totalled $140m. It fell from $148m registered in the corresponding quarter of 2021.
Diluted earnings per share in the quarter stood at $3.50.
Mission Technologies, a business segment of HII which was formerly called Technical Solutions, reported a 127.8% growth in quarterly revenues.
The unit’s revenues totalled $590m in Q1 2022, up from $259m reported in Q1 2021.
The company’s other two businesses, namely Ingalls Shipbuilding, and Newport News Shipbuilding, recorded a drop in quarterly revenues.
Ingalls Shipbuilding’ revenues fell from $649m to $631m on a Y-o-Y basis while Newport News Shipbuilding revenues fell 1.2% from the same quarter last year to $1.39bn.
HII president and CEO Chris Kastner said: “We are pleased with another quarter of consistent program execution, and results that were slightly ahead of our initial expectations, as we continue to navigate through a challenging operational environment.
“We believe HII is well positioned for long-term value creation with very strong shipbuilding backlog and demand signals, as well as a highly capable Mission Technologies division that has been strategically shaped to address our customers most pressing needs.”
During the quarter, HHI secured new contracts worth approximately $2bn. This brings the company’s total backlog to nearly $47.9bn as of 31 March 2022. In the fourth quarter of 2021, HHI reported a 2.9% drop in revenues. (Source: army-technology.com)
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.