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06 Dec 23. Gecko Robotics Raises $100m to Extend Series C Funding. Gecko will help modernize strategic nuclear missile silos for the US Air Force, and continues increasing the speed of maintenance cycles for the US Navy surface fleet.
Gecko Robotics has extended its Series C funding round bringing the total Series C raise to $173m. The company is an industry leader in using AI-powered software and advanced robotics to maintain and build some of the world’s most important physical infrastructure. As part of the extension, Gecko is adding representatives from US Innovative Technology Fund (USIT) and Founders Fund to its corporate board. The addition of Founders Fund and USIT, both well-known investors in the defense technology space, comes on the heels of last week’s announcement that Gecko will help the U.S. Navy increase the speed of the manufacturing process for the $132bn Columbia-class Sub program. Since the initial Series C announcement, Gecko has experienced a major increase in demand from both the U.S. military and its allies. Gecko signed a contract with the U.S. Air Force to help with the modernization of strategic nuclear missile silos, and has continued to expand its work with the U.S. Navy to help increase the speed of maintenance cycles for the surface fleet. Last month, Gecko announced the launch of Cantilever, the company’s new AI-powered software platform used by the Navy and other customers to increase the speed of decision making. The company’s latest initiative to help the Navy modernize the manufacturing and construction process of the Columbia-class program furthers this trend. The board seats will be filled by USIT Managing Director Gaetano Crupi, who is the co-founder and former CEO of Cabin Technologies, and Trae Stephens of Founders Fund, who is also the Co-Founder and Executive Chairman of Anduril Industries.
Gecko Robotics CEO Jake Loosararian said; “This investment is designed to help supercharge our work ensuring the critical assets that our military relies on to protect our national security are ready. From our work getting ships out of maintenance cycles faster to helping build the next generation of military equipment, Gecko is proud to be increasing our partnerships with the US Military – and we’re looking forward to having USIT and Founders Fund onboard helping us continue that growth.”
Trae Stephens, Partner at Founders Fund, added; “Gecko Robotics is solving a problem that does not get enough attention. Maintenance is often overlooked but it can mean the difference between having the military assets we need to respond to a national security threat or not.
“American innovation is leading the way in building the future technology to protect the freedom and security of America and our allies. Gecko is on the frontlines of making sure the assets we rely on are ready if called upon – both today and tomorrow.” (Source: https://www.defenseadvancement.com/)
06 Dec 23. Safran weighs protest against Rome’s defence deal veto. France’s Safran (SAF.PA) does not exclude a protest against Italy’s decision to block part of its planned $1.8 bn purchase of the flight control systems business of Collins Aerospace (RTX.N), Chief Executive Olivier Andries said.
Prime Minister Giorgia Meloni vetoed the acquisition of Collins’ Italian subsidiary Microtecnica under special “golden power” rules last month, citing national security and concerns over the future of a “strategic” asset.
Speaking to reporters during a visit to Morocco, Andries said any political solution to the standoff would be apparent relatively quickly, but voiced little optimism of that actually happening.
“If not, we don’t exclude protesting. It is possible to contest decisions taking by the administration,” he said.
Meloni’s office declined comment.
Under Italian rules, Safran can appeal a takeover veto through an administrative court. Past attempts to change similar decisions have failed, however.
In April last year, an Italian administrative court ruled that the government’s veto of a purchase of seed producer Verisem by Chinese-owned Syngenta was valid, after the agrochemicals giant had attempted to reverse the decision.
Italy’s vetting mechanism is designed to protect what are considered key national assets, and has been used by governments to fend off attempts by foreign suitors to buy assets such as banks and energy firms.
Andries said a third scenario would be to go ahead without the Italian part of the deal, though this would depend on some re-negotiation.
“We remain attached to the transaction because these activities only make up 15% of the Collins activities,” Andries told reporters, adding the most attractive parts of the package of assets being bought were located in France and Britain.
“The seller is still a seller”.
Explaining the decree, which has not been fully published, an Italian government source said last month Safran did not provide sufficient guarantees it would preserve production lines in Italy.
The source also said Italy had held talks with the German government about the Safran deal and that Germany had highlighted the risk that the deal could hamper spares and services for the Eurofighter and Tornado jet fighter programmes.
Andries said Germany had signalled that it would have no objections if Safran could guarantee continued service, which it would be happy to do.
Two German government sources said last month Berlin did not tell Rome to ban the takeover but that it was important to take measures to ensure the continued provision of spare parts for the Eurofighter and Tornado jet fighter programmes.
The spat is the latest example of recurring tensions between France and Italy over cross-border transactions in recent years.
In 2017, France moved to nationalise the STX France shipyard to prevent Italy’s Fincantieri taking majority control, triggering an angry response from Rome to President Emmanuel Macron’s first big industrial policy decision.
Macron and Meloni’s right-wing government have clashed in the past year on issues including migration. (Source: Google/Reuters)
06 Dec 23. Japanese satellite imagery startup iQPS see 120% liftoff in Tokyo debut.
- Summary
- At 860 yen a share, iQPS valued at $204m
- iQPS’s SAR technology crucial for remote sensing
- Japanese space startups see boon from military buildup
Shares of Institute for Q-shu Pioneers of Space (iQPS) (5595.T) surged 120% in their Tokyo growth-market debut on Wednesday, after the satellite imagery startup raised 3.48bn yen ($24m) in an initial public offering (IPO).
The stock opened at 860 yen per share versus its IPO price of 390 yen, with trading delayed by nearly five hours due to a glut of buy orders.
Spun off from a Kyushu University lab in 2005, iQPS becomes the second major space venture to list in Tokyo after ispace inc (9348.T) had a blistering debut in April.
The Fukuoka-based startup has developed small satellites with the synthetic aperture radar (SAR), which takes picture of the earth’s surface with microwaves. Unlike optical sensors, SAR can capture images during dark nights or through clouds and is becoming a vital remote sensing technology for national security and disaster management.
SAR imagery taken by satellite companies such as U.S.-based Capella Space and Finland’s ICEYE has contributed to monitoring by the Western intelligence community of Russia’s war on Ukraine.
Japan is pushing to build a homegrown space industry, especially given deepening concern about China’s growing technological and military clout. Japan has a number of space-related startups, including lunar transport startup ispace.
The market debuts of the two space ventures mark a stark contrast to the recent setbacks the state-funded Japan Aerospace Exploration Agency (JAXA) has faced in rocket development. In March, JAXA manually destroyed its new H3 launcher mid-air due to ignition trouble, where iQPS lost two of its satellites.
The company sold 8.92m shares after pricing the IPO at the top of its indicated range of 380-390 yen. That doesn’t include a greenshoe option of 1.34 m shares.
More than 80% of the shares were sold to domestic investors, with just under 19%, or 1.69m, going to overseas investors.
The price of 860 yen a share values iQPS at around 30.1bn yen. A venture capital fund managed by Sparx Group (8739.T), satellite giant Sky Perfect JSAT (9412.T) and state-backed fund INCJ were among iQPS’s biggest external shareholders upon listing.
In June, iQPS successfully launched its third satellite on a SpaceX rocket, which has generated commercial imagery with resolution of as fine as 46 centimetres, it said in its prospectus. It will manufacture 10 SAR satellites a year from 2024, aiming to establish a “constellation” of 24 satellites around the earth to obtain real-time data by 2028.
Japan’s military build-up has also been a boon for aerospace businesses like iQPS, which said it relied on the defence ministry and other government clients for 94% of its 37bn yen sales in the year to May.
The government has promised “comprehensive support” for space startups with SAR, on-orbit services and other security-related technologies and announced an up to 4.1bn yen grant each to iQPS and its domestic competitor Synspective Inc.
Globally, investments in space startups recently rose for the first time in more than a year, venture capital firm Space Capital said in October, with investors returning to companies that could tap government funding.
iQPS forecasts to book a net loss of 713m yen in the current financial year and has not set a target for when it will turn a profit.($1 = 147.2600 yen) (Source: Reuters)
05 Dec 23. Introducing Astrion, a Transformative Evolution of Oasis Systems and ERC. Brightstar Capital Partners today unveils Astrion (the “Company”), a new company committed to innovation and customer progress in the U.S. Government’s Civilian, Defense, and Space communities. Astrion brings together two flagship government services firms, Oasis Systems and ERC, with a combined 60-year legacy of dedicated service, proven results, and mission success.
Astrion embraces a forward-thinking spirit to tackle critical challenges across cybersecurity, digital solutions, mission support, and systems engineering to support the Air Force, Army, Civilian Agencies, Navy, and Space. The Company unites over 2,800 employees serving customers across the U.S. with Centers of Excellence in Washington, DC; Huntsville, AL; and Burlington, MA.
The Astrion Difference
Astrion’s resources, deep expertise, and scalable solutions enable the organization to invest in and deliver innovative capabilities for defense and federal agencies. With a focus on optimizing security programs, creating and managing comprehensive digital systems, providing specialized mission support services and delivering systems engineering and integration solutions, Astrion drives exemplary customer results.
“Our investment in Astrion’s expanded leadership and services ensures that Astrion not only will continue to deliver innovative solutions, but also substantially expand its Civilian and Defense sector capabilities,” said Michael Singer, Partner at Brightstar Capital Partners. “We are confident that Astrion’s agility, ingenuity, and combined experience will drive value with industry-defining results.”
Astrion’s Executive Leadership Team
Led by industry veteran and CEO Dave Zolet, Astrion’s executive leadership team is comprised of seasoned industry leaders from both the public and private sectors. Executive biographies available here.
“Astrion is about innovation, forward motion, discovery, and progress,” said Dave Zolet, CEO of Astrion. “Our industry-leading executive team brings decades of experience building winning teams that deliver results with impact – at scale. Astrion is a launchpad for bolder, inventive solutions using our unique legacy of experience, innovation and determination to advance our customers’ missions, help them see the unseen, and address tomorrow’s challenges with agility, creativity, and shared vision.”
About Astrion
Astrion delivers the difference that empowers our customers and nation to take on what’s next.
Astrion stands as a partner for progress, providing cutting-edge services that boost preparedness, optimize performance, and ensure mission success. The company’s experience and passion are evident with each engagement, with deep expertise in cybersecurity, digital solutions, mission support, and systems engineering, Astrion delivers Results with Impact. Astrion is uniquely positioned to combine the sophistication and robust systems of a large company with the agility and adaptability of a small company, uniquely empowering us to be the difference for our customers. For more information, please visit www.astrion.us.
About Brightstar Capital Partners
Brightstar Capital Partners is a middle market private equity firm focused on investing in closely held family, founder, or entrepreneur-led businesses where Brightstar believes it can drive significant value with respect to the management, operations, and strategic direction of the business. Brightstar employs an operationally intensive “Us & Us” approach that leverages its extensive experience and relationship network to help companies reach their full potential. For more information, please visit www.brightstarcp.com. (Source: BUSINESS WIRE)
05 Dec 23. Arkeus secures manufacturing and development funding for optical systems. Australian optical autonomy company Arkeus has raised $4.45 m in seed funding, as the company develops artificial intelligence-powered hardware for autonomous drones and aircraft.
The new funding will allow Arkeus to scale up manufacturing and enhance the capabilities of its core product suite, the Hyperspectral Optical Radar, which is designed to give customers the ability to “see”, understand, and act on their environment in real time.
Arkeus’ optical systems give responders the ability to “see” and respond in real time, using data from a wide range of visible and non-visible light spectra with autonomous capabilities capable of real-time detection, recognition, and tracking of relevant people and objects in complex environments.
In high-risk environments like defence and search and rescue operations, first responders make split-second decisions based on their knowledge of the landscape, objects, and people around them, to this end, Arkeus has secured multiple defence contracts for its autonomous optics technology.
“In high consequence situations where every second counts, defence and emergency responders are often hampered by outdated sensors built for a narrow range of light wavelengths,” according to Arkeus chief executive officer and co-founder Simon Olsen.
“Arkeus is pioneering a new way of sensing, built from the ground up to overcome these limitations and deliver mission-critical information at the point of contact.”
“We saw an opportunity to build something new; hardware-enabled software,” according to Arkeus aerospace engineer Dr Jonathan Nebauer.
“Our technology is customised and optimised to operate in the most adverse conditions, with minimal to no human involvement. Our job is to extract the hardest to get information from the most challenging environments, quickly.” (Source: Defence Connect)
05 Dec 23. Optics on Gooch & Housego’s fortunes improve. Company eases capacity constraints by outsourcing more.
- Net debt up by two-thirds to £31.7m
- Valuation is well below long-run average
By its own admission, profitability at photonics specialist Gooch & Housego (GHH) has been “disappointing” over the past few years. Some of this has been down to external supply chain and labour market pressures, but it has also admitted to “operational shortcomings” and overhauled its management in a bid to address this.
Chief executive Charlie Peppiatt, who joined the company at the end of its 2022 financial year, has been leading attempts to address this, completing a strategic review that has identified a target of delivering a “mid-teen return on sales” over the medium term.
Its latest full-year results show signs of progress. Revenue increased by 13.6 per cent on a like-for-like basis and adjusted operating profit was up 28 per cent to £11.3m. The latter figure was helped by an improvement in capacity, delivered (at least in part) by contracting more of its work out to third parties.
Peppiatt said that for much of its work, particularly for aerospace and defence customers and in advanced semiconductors, outsourcing isn’t possible. Customers work with it precisely because it designs, develops and builds its specialist products in the UK or in North America.
“But I think at the same time I would describe G&H’s approach to this as hyper-conservative,” Peppiatt said. “We are being more proactive for certain products.”
Labour market pressures have also eased. Although pay rates remain elevated, it is now largely fully staffed in the UK and “pretty much there in North America”, Peppiatt added. Some jobs may still take months to fill but they are no longer permanently vacant. Supply chain strains are also lessening, although it is still carrying more stock than in the past as “a risk reduction exercise”. This, and the £11.7m paid for acquisitions during the year meant net debt increased by two-thirds to £31.7m, although the company described this level as “comfortable”, at 1.1 times cash profit.
A statutory operating margin of below 4.6 per cent – well below the double-digit level achieved between 2010 and 2017 but which hasn’t been hit since – is perhaps the best explanation for why Gooch & Housego shares now trade at under 13 times FactSet consensus forecast earnings, compared with a five-year figure of over 22 times. The outlook for its “increasingly uncertain” end markets also doesn’t help. But the progress the company has made on its turnaround so far means we maintain our faith in its prospects. Buy. Last IC view: Buy, 562p, 6 Jun 2023. (Source: Investors Chronicle)
05 Dec 23. Solid State continues to profit from the defence spending boom. A value-added electronics group is growing its order book and profits, trends that are underpinned by secular growth in defence spending.
- First half revenue up 48 per cent to £88.1m
- Adjusted pre-tax profit up 39 per cent to £7.3m
- Net debt slashed from £16.1m to £3.9m
First-half results from Redditch-based value-added electronics group Solid State (SOLI: 1,340p) benefited from a full six-month contribution from the August 2022 acquisition of California-based battery pack manufacturing business Custom Power. However, organic growth was still eye-catching, with revenue growth of around 35 per cent on a like-for-like basis.
The electronics group supplies commercial, industrial and defence markets with durable components and manufactured units for use in specialist and harsh environments. Specifically, Solid State focuses on industrial and ruggedised computing, displays, battery power packs, communications including antennas and secure radio systems, and imaging technologies.
The uncertain geopolitical environment is playing firmly into its hands by driving increased demand from clients in the defence and security segments, which account for a fifth of current year revenue estimates of £155m. As a UK-based systems provider, Solid State has relationships with Tier 1 suppliers such as BAE Systems (BA.) and direct exposure to Nato agencies. For instance, the group is supplying £17.1m-worth of communication equipment to a defence customer as part of Nato procurement contracts. The directors highlight ongoing robust demand from military and security markets.
They also report 9 per cent growth in the order book to £108.6m since the half-year end which adds weight to expectations of 22 per cent growth in full-year revenue, to £155m. Moreover, the group has a strong pipeline of contract opportunities as well as a robust pipeline of new design wins across all parts of the business.
It’s also worth noting that Solid State’s robust free cash flow generation has slashed debt and analysts forecast a small net cash position in the 2024-25 financial year. The balance sheet strength points to more earnings per share (EPS) accretive acquisitions being made in due course.
Rated on 11 times operating profit estimates of £14mn to enterprise valuation of £155m, and on a price/earnings (PE) ratio of 15.6, the rating is modest for a business that should deliver both a mid-teens return on capital employed (ROCE) and post-tax return on equity in the current financial year.
Offering a further 26 per cent upside to the 1,700p target I outlined when I initiated coverage (Alpha Research: An overlooked share to benefit from rising defence spending’, 20 July 2023), the shares rate a buy. (Source: Investors Chronicle)
05 Dec 23. HENSOLDT acquires ESG Elektroniksystem- und Logistik-GmbH.
- HENSOLDT acquires ESG Elektroniksystem- und Logistik-GmbH (“ESG“) from an investment vehicle managed by Armira Beteiligungen GmbH & Co. KG (“Armira”). ESG is a leading German defence systems integrator with low double-digit annual revenue growth.
- The highly complementary, high-growth acquisition accelerates HENSOLDT’s sensor solutions strategy by building on ESG’s leading innovation, software engineering and systems integration expertise.
- Transaction valued at an enterprise value of EUR 675m plus an earn-out of up to EUR 55m based on specific performance targets to 31 December 2024, implying an EV/EBITDA 2024E of ~10x post run-rate cost synergies.
- The acquisition is expected to be highly value creative and financially accretive. o Accretive to HENSOLDT stand-alone revenue growth and FCF generation
o EPS accretive by year 2 including cost synergies only and double digit accretive by year 4 including cost and revenue synergies.
o ROIC above WACC by year 4 including cost synergies only and by year 3 including cost and revenue synergies.
- The transaction has full support of HENSOLDTs two key shareholders the Federal Republic of Germany and Leonardo S.p.A.
- The acquisition is expected to be completed in H1 2024, subject to certain conditions, including obtaining necessary regulatory approvals.
The HENSOLDT Group (“HENSOLDT”) today announced that it has signed a definitive agreement to acquire ESG Elektroniksystem- und Logistik-GmbH (“ESG”), from an investment vehicle managed by Armira Beteiligungen GmbH & Co. KG (“Armira”). ESG is a leading platform-independent systems integrator as well as established technology and innovation partner for defence and security. With the acquisition of the highly complementary defence technology business of ESG, HENSOLDT expands its business with strong design and systems integrator capabilities.
Thomas Müller, CEO of the HENSOLDT Group, says: “The acquisition of ESG is an excellent fit with our overall strategy and accelerates HENSOLDT’s development as a solution provider for defence and security. By combining highly complementary capabilities from HENSOLDT and ESG, we are taking a decisive step towards becoming a leading European provider of seamlessly integrated solutions. This will put us in an ideal position to meet the existing and future requirements of our customers around the world.”
Christian Ladurner, CFO of the HENSOLDT Group, says: “The acquisition of ESG is an excellent opportunity to take our business to the next level. ESG exhibits strong growth and cash conversion given its capex-light business model. We have identified significant cost and revenue synergies which will drive attractive value creation while maintaining our discipline in capital allocation and net leverage.”
Advanced software engineering and systems integration capabilities with high profitable growth
Founded in 1967, ESG is a platform-independent systems integrator and technology and innovation partner for defence and public security. ESG develops, integrates, supports and operates highly complex, security-related electronic and IT systems for defence and security. The company serves the defence and security needs of German and foreign armed forces, public authorities and companies. ESG has been able to establish itself as a strong German systems design and integration house, playing a vital role in major current and future programs such as FCAS (“Future Combat Air System”) and F-35. Today, the company employs 1,380 people in Germany, the Netherlands and the USA with exceptional technological expertise.
For 2023, the company’s revenue is expected to be approximately EUR 330 m in accordance with IFRS, with annual growth in the low double-digit percentage range and an EBITDA margin of approximately 14%, generating strong cash flows, with maintenance capex under 1.5% of revenue.
Highly complementary defence technologies
Adding ESG’s solution portfolio will enable HENSOLDT to combine knowledge of customer ConOps (“Concept of Operations”), certifications and engineering know-how to develop smarter solutions in a faster way, in particular the digitalization of the battlefield and development ofintegrated network solutions. Potential examples would include areas such as Ground Based Air Defence, Signals Intelligence, Command and Control as well as enhanced solution capabilities in various airborne and naval campaigns. In addition, it will create new opportunities in platform lifecycle services deepening HENSOLDT’s offering across training, logistics and maintenance for own and third-party installed bases. Finally, the combined company will also be a strong support partner for systems procured in the USA and Israel, ensuring long-term systems support and further development in Germany.
Acquisition accelerates HENSOLDT’s sensor solutions strategy
Integrating ESG’s software engineering and systems integration capabilities will support HENSOLDT’s positioning as a comprehensive solutions provider. ESG brings expertise in intelligent data networks to integrate HENSOLDT sensor systems across domains, creating critical integrated solutions for multi-domain operations. Given the highly complementary skillsets, strong cultural fit and stakeholder support, the combined group is ideally positioned to accelerate its international growth based on the track records and growth trajectories of the two companies, while remaining firmly rooted in Germany and protecting national security interests. Attractive value creation and prudent financing
HENSOLDT is acquiring 100% of ESG for an enterprise value of EUR 675m plus an earn-out of up to EUR 55mi based on specific performance targets to 31 December 2024.
HENSOLDT expects to generate EUR 19 m run rate annual cost synergies in addition to revenue synergies from cross-selling and combined positioning for future pipeline opportunities.
The acquisition value including the earn-out implies an EV/EBITDA 2024E of ~10x post run-rate cost synergies and ~14x excluding run-rate cost synergies. In addition to the strong strategic rationale the transaction is expected to be highly financially accretive:
- Accretive to HENSOLDT stand-alone revenue growth and FCF generation.
- EPS accretive by year 2, including cost synergies only, and double-digit accretive by year 4, including cost and revenue synergies.
- ROIC (“Return on Invested Capital”) over WACC (“Weighted Average Cost of Capital”) by year 4, including cost synergies only, and by year 3, including cost and revenue synergies.
HENSOLDT intends to finance the acquisition through a capital increase from authorized capital of up to 10% of the current share capital and new debt in the amount of approximately EUR 450m. The Federal Republic of Germany, indirectly acting through Kreditanstalt für Wiederaufbau (KfW), holding 25.1% of the shares in HENSOLDT, intends to participate in the potential capital increase pro rata to its shareholding quota.
The acquisition is expected to be completed in H1 2024, subject to certain conditions, including obtaining necessary regulatory approvals.
HENSOLDT is advised by Deutsche Bank AG as financial advisor and Gleiss Lutz and Hengeler Mueller as legal advisor.
HENSOLDT is a leading company in the European defence industry with global reach. Based in Taufkirchen near Munich, the company develops complete sensor solutions for defence and security applications. As a technology leader, HENSOLDT drives the development of defence electronics and optronics and is continuously expanding its portfolio based on innovative approaches to data fusion, artificial intelligence and cyber security. With more than 6,500 employees, HENSOLDT achieved a turnover of EUR 1.7 bn in 2022. HENSOLDT is listed in the MDAX on the Frankfurt Stock Exchange.
www.hensoldt.net
About ESG Elektroniksystem- und Logistik-GmbH
ESG Elektroniksystem- und Logistik-GmbH is one of the leading German companies for the development, integration, maintenance, support and operation of complex, safety-relevant systems, mission equipment, software and IT. ESG is an approved aviation organisation for aircraft and aircraft equipment of the German Armed Forces and an aeronautical organisation according to EASA Part 21J, EASA Part 21G and EASA Part 145. Independence, engineering spirit and in-depth domain knowledge are at the core of its entrepreneurial DNA. As a reliable technology and innovation partner to the German Armed Forces, authorities and industry, ESG has been offering customised solutions, services and products for security in all dimensions of a networked world for over 50 years.
www.esg.
05 Dec 23. Counter-drone company OSL receives £3.5m investment from BGF.
Operational Solutions Ltd (OSL), a counter-drone technology company, has announced a significant follow-on investment of £3.5m from BGF, a leading growth capital investor, bringing the total investment to £11.5m.
This additional funding extends the previous £8m investment made in 2021. OSL has a proven track record of providing solutions to prestigious clients such as Heathrow Airport and Wembley Stadium, experiencing a remarkable 50% increase in revenue and over 50% team growth in the past year. This funding empowers OSL to persist in developing innovative solutions that align with the dynamic landscape of counter-drone technologies, reaffirming its commitment to safety and security in diverse sectors, including airports, sports arenas, and events.
Noteworthy examples of OSL’s leadership include heading the Project HADO® consortium and receiving the SME Creative Solutions Award. As drones become increasingly integral across various industries, from sports and events to Critical National Infrastructure, this investment aligns with OSL’s growth funding strategy. The goal is to advance technology and commercial adoption, enrich product offerings, and facilitate overall business expansion.
This investment reflects BGF’s ongoing confidence in OSL’s innovative approach to addressing the challenges posed by unmanned aircraft systems (UAS).
About Operational Solutions Ltd (OSL)
Operational Solutions Ltd is a leading counter-drone technologies business based in Reading, UK. With a proprietary intelligent software platform, FACE®, OSL provides solutions to challenges posed by the increasing prevalence of unmanned aircraft systems in airspaces worldwide. The company actively supports major international airports, national infrastructure projects, and defense markets.
About BGF
The Business Growth Fund (BGF) is the UK and Ireland’s most active growth capital investor, providing long-term capital for small and medium-sized enterprises. With a mission to unlock the potential of ambitious businesses, BGF supports companies in various sectors to achieve their growth goals. (Source: https://cuashub.com/)
04 Dec 23. SAIC Announces Third Quarter of Fiscal Year 2024 Results.
- Revenues of $1.90bn; 10.6% organic growth adjusted for impact of divestitures
- Net income of $93m; Adjusted EBITDA(1) of $178m or 9.4% as a % of revenues, an increase of 50 bps year-over-year
- Diluted earnings per share of $1.76; Adjusted diluted earnings per share(1) of $2.27
- Cash flows provided by operating activities of $101m; Transaction-adjusted free cash flow(1) of $148m
- Company increases revenue and adjusted diluted EPS(1) guidance for fiscal year 2024
Science Applications International Corporation (NYSE: SAIC), a premier Fortune 500® technology integrator driving our nation’s digital transformation across the defense, space, civilian, and intelligence markets, today announced results for the third quarter ended November 3, 2023.
“It is an honor to lead SAIC at a time of such convergence in protecting this country’s national security interests, embracing the ongoing acceleration of technological innovation, and charting this company’s course for continued success in the future,” said SAIC CEO Toni Townes-Whitley. “To ensure our leadership in the market, SAIC is focused on strategic pivots across four key dimensions of the business: innovation & solutions, go-to-market, culture, and brand. As we move out on this strategy, I’m encouraged by some early signs of success and look forward to sharing our progress against milestones in the coming quarters and years. We believe our financial results in the third quarter demonstrate that we are entering the next phase of our strategy from a position of strength.”
Third Quarter of Fiscal Year 2024: Summary Operating Results
Revenues for the quarter decreased $14m or 1% compared to the same period in the prior year primarily due to the sale of the logistics and supply chain management business (Supply Chain Business) ($161m), the deconsolidation of the Forfeiture Support Associates J.V. (FSA) ($35m), and contract completions, partially offset by ramp up on existing and new contracts. Adjusting for the impact of the divestiture of the Supply Chain Business and the deconsolidation of FSA, revenues grew 10.6%.
Operating income as a percentage of revenues increased from the comparable prior year period primarily due to improved profitability across our contract portfolio.
Adjusted EBITDA(1) as a percentage of revenues for the quarter increased to 9.4% from 8.9% for the same period in the prior year primarily due to improved profitability across our contract portfolio and lower indirect costs.
Diluted earnings per share for the quarter was $1.76 compared to $1.45 in the prior year quarter. Adjusted diluted earnings per share(1) for the quarter was $2.27 compared to $1.90 in the prior year quarter. The weighted-average diluted shares outstanding during the quarter decreased to 53.3m from 55.5m during the prior year quarter.
Cash Generation and Capital Deployment
Cash flows provided by operating activities for the third quarter decreased $27m compared to the prior year quarter, primarily due to timing of payroll payments and higher tax payments in the current year, partially offset by timing of vendor payments and other changes in working capital. Transaction-adjusted free cash flow(1) was $148m in the third quarter, an increase of $26m compared to the prior year quarter, primarily due to increased earnings and improved working capital efficiency.
During the quarter, SAIC deployed $124m of capital, consisting of $101m of plan share repurchases, $19m in cash dividends, and $4m of capital expenditures.
Quarterly Dividend Declared
As previously announced, subsequent to quarter end, the Company’s Board of Directors declared a cash dividend of $0.37 per share of the Company’s common stock payable on January 26, 2024 to stockholders of record on January 12, 2024. SAIC intends to continue paying dividends on a quarterly basis, although the declaration of any future dividends will be determined by the Board of Directors each quarter and will depend on earnings, financial condition, capital requirements and other factors.
(1)Non-GAAP measure, see Schedule 5 for information about this measure.
Backlog and Contract Awards
Net bookings for the quarter were approximately $2.5bn, which reflects a book-to-bill ratio of 1.3 and a trailing twelve months book-to-bill ratio of 0.9. SAIC’s estimated backlog at the end of the quarter was approximately $23.1bn. Of the total backlog amount, approximately $4.0bn was funded.
Notable New Awards:
U.S. Space Force: SAIC was awarded a seven-year, $575m contract by the United States Space Force to support its Ground Based Radar Maintenance and Sustainment Services (GMASS). Under the contract, SAIC will provide on-going sustainment and modification of the GMASS Contract-covered systems, including Upgraded Early Warning Radars (UEWR), the Precision Acquisition Vehicle Entry (PAVE) Phased Array Warning System (PAWS), and the Perimeter Acquisition Radar Attack Characterization System (PARCS) radars and all associated systems and equipment. In addition to sustaining operational capabilities, the contract will also utilize an integrated roadmap to highlight incremental opportunities and areas for innovation to promote backlog items and improve operational efficiencies. Through this work, SAIC will help further modernize critical missile warning and space domain awareness radars for key Space Force missions.
Notable Recompete Awards:
Naval Information Warfare Center: SAIC was awarded a $375 m contract to continue providing Command, Control, Communications, Computers (C4) Intelligence, Surveillance and Reconnaissance (ISR) fielding and integration on land-based vehicle platforms in support to the Naval Information Warfare Center – Atlantic (NIWC LANT). Under the five-year contract, SAIC will support NIWC LANT with production-engineering, integration, installation, logistical and programmatic support required to enable C4ISR fielding and integration on land-based vehicle platforms such as Mine Resistant Ambush Protected (MRAP) and Joint Light Tactical Vehicle (JLTV) across multiple Department of Defense services at both continental U.S. and overseas locations. SAIC has invested in its Charleston facilities to enable the execution of vehicle fielding integration and support missions.
Notable Space and Intelligence Community Awards:
U.S. Space and Intelligence Community: During the quarter, SAIC was awarded approximately $1.1bn of contract awards by space and intelligence community organizations. These awards represent a combination of new business and recompetes.
Other Notable News:
SAIC Announces New Data and AI Features To Improve Government Mission Outcomes: SAIC launched new offerings for Tenjin and additional features for Koverse. The innovative Tenjin offerings enable organizations to handle and store their complex sensitive data securely from the enterprise to the edge, as well as operationalize Artificial Intelligence (AI) while the additional Koverse features improve and accelerate the capacity for defense and civilian customers to unlock the value of their data.
SAIC Announces New Zero Trust Edge Capability: SAIC launched new, purpose-built Zero Trust security capabilities optimized for the government market, which provide a solution to answer the Zero Trust pillars addressing data, identity, devices, networks, applications and workloads. The new Zero Trust security capabilities have been tested and validated on an AWS Snowball Edge and AWS Snow Family device with on-board storage and compute power for select Amazon Web Services (AWS) capabilities. AWS Snowball Edge can support local processing and edge-computing workloads in addition to transferring data between a user’s local environment and AWS. (Source: BUSINESS WIRE)
05 Dec 23. Fogmaker International acquires the assets from Siveb Oy and expands its market presence in Finland. Fogmaker International AB, one of the leading global suppliers of fire suppression systems for engine compartments and enclosed spaces, is excited to announce the acquisition of the assets of Siveb Oy, through Fogmaker Finland Oy, on December 1st, 2023.
The acquisition marks a significant milestone in strengthening Fogmaker International’s foothold in the Finnish market. Employees of Siveb Oy will continue their employment under Fogmaker Finland Oy. The team brings excellent knowledge and experience in the area and unlocks new possibilities in the market. The focus will be to serve a more comprehensive range of customers and drive further growth. The acquisition effectively meets the evolving needs of customers in the region, delivering advanced and comprehensive fire suppression solutions to customers worldwide and providing various sectors with customized industrialized solutions that meet their specific needs.
“We are thrilled about the acquisition and its expanded opportunities to Fogmaker International. It will allow us to strengthen our presence further and better serve our valued customers in the region. The acquisition is a significant step towards achieving our vision of creating safer environments globally,” said Lars Alrutz, CEO of Fogmaker International.
“We are delighted to join the Fogmaker International family. We have known the company for a long time and know the excellent products as well as the company culture they represent. We will be able to provide our customers with even more innovative solutions and increased value. We are excited to embark on this new chapter and look forward to a successful partnership,” said Kristian Lindström, the owner of Siveb Oy.
“We are proud of Fogmaker International’s acquisition and the strategic expansion it signifies. Fogmaker International’s strong market position aligns perfectly with our growth ambitions. We are excited about the opportunities this acquisition brings and look forward to the continued success of Fogmaker International,” says Lars Fredin, Group CEO of Dacke Industri and Chairman of Fogmaker International.
About Fogmaker International AB
Fogmaker International, a subsidiary of Dacke Industri since 2022, is a leading provider of fire suppression systems for engine compartments and other enclosed spaces with high-pressure water-based mist. Based in Växjö with 100 employees and an annual turnover of about SEK 400 m. The company has its roots in Småland, Sweden, and is recognized as an industry leader in safety awareness. It serves a wide range of sectors, including Buses, Mining, Material Handling, Forestry, Trucks, Construction Equipment, Agriculture, and Airports, with its reliable, efficient, and environmentally friendly fire suppression systems.
Visit www.fogmaker.com to learn more.
This is Dacke Industri
Dacke Industri is a long-term owner that invests in innovative technology companies within selected niches with potential for development. We provide expertise and strategic guidance to build sustainable companies over time. We follow a decentralized model where our companies have a high degree of autonomy and are run independently.
Our companies have their own products or systems with a strong technical focus, development- and design expertise, and quality execution. The companies use existing platforms for innovation and work towards environmentally sustainable products and production. Today Dacke Industri has 18 subsidiaries within 4 divisions, close to 1500 employees worldwide, and net sales of SEK 4,3bn. Dacke Industri is owned by Nordstjernan since January 2016.
04 Dec 23. Rohirrim Raises $15m in Series A Round Led by Insight Partners to Provide Domain-Aware Generative AI to the Enterprise. Rohirrim, the cutting-edge technology company specializing in domain-aware generative AI for the enterprise, today announced the successful completion of its $15 m Series A round of funding less than a year since emerging from stealth and deploying its Rohan platform. The round, led by global software investor Insight Partners with participation from existing investor General Purpose Venture Capital, will help solidify Rohirrim’s position as the market leader in domain-aware generative AI for the enterprise. Rohirrim will use the investment to continue building its world-class team and further enhance its platform and offering of secured, company and task-specific language models.
Rohirrim solves a deep need in the enterprise business development community for the capture and proposal writing process. It leverages a patented generative AI technology that can securely assimilate vast amounts of data—data solely derived from the enterprise domain—to construct meaningful, useful responses to RFPs. Its product, Rohan, was built to respond to the pain points enterprises experience in proposal writing that are tied directly to revenue generation. It saves an exponential amount of time and money, ensuring enterprises can safely utilize its benefits without any inherent risk. The use cases for Rohan far exceed proposal writing functions, given the level of security its patented generative AI platform provides, and this funding enables Rohirrim to create value through its outcomes, and scale into new markets swiftly.
Steven Aberle, founder & CEO of Rohirrim, is a recognized leader in the field and has experienced first-hand the need for a platform like Rohirrim. Having managed one of the largest collections of unstructured data in the world at Los Alamos National Laboratory (LANL), and with vast knowledge of customer pain points from writing thousands of pages of proposals throughout his career, Steven has a unique understanding of the problem Rohirrim is solving.
“Every once in a while, an innovation comes along that doesn’t just promise to redefine industries but, more importantly, has the power to touch lives, change futures, and rewrite stories. We’re thrilled that Insight Partners has recognized this potential in Rohirrim, and with their backing, we’ll scale into hundreds of enterprises, continuing to deliver exceptional outcomes that bring forth mass effect transformation,” said Aberle.
“Rohan drafts high-quality responses, specific to your company, in mere moments, giving your team more time to focus on what humans do best–strategize, story tell and persuade,” said Matt Koran, Principal at Insight Partners. “Steven and his team’s commitment to innovation and customers positioned Rohirrim early on as the go-to partner for organizations seeking to unlock their full data potential and realize transformative business outcomes.” With Insight’s investment, Koran joins Rohirrim’s Board of Directors.
An early adopter of Rohan, IBM has carried its culture of innovation into its proposal and solution processes. “The limitless possibilities of generative AI are evident, and the advantages of the Rohan platform are clear,” remarked James Farley, Vice President of Enterprise Solutions for IBM. “With Rohan, the domain-aware generative AI platform, we’ve streamlined content creation, reducing time and enabling our team to focus on higher-value tasks. The potential it brings to our industry and others is here, and we can’t afford to ignore it.”
In 11 months, Rohirrim has witnessed significant growth and adoption across various industries, including defense & aerospace, commercial real estate, energy, higher education, insurance, research laboratories, law, patent and trademarks, consulting firms, and global engineering firms. The company’s innovative offering has attracted a significant number of multibn-dollar Fortune 100 enterprises that rely on Rohirrim’s systems to streamline and provide remarkable efficiency to their most grueling processes for revenue generation – proposals. These partnerships and the company’s exponential growth underscore the confidence the industry has in Rohirrim’s ability to deliver world-class solutions that drive business success.
Rohirrim’s Series A financing round marks a significant milestone in the company’s journey, solidifying its position as a leader in domain-aware generative AI for the enterprise. With this fresh infusion of capital and the continued support of Insight Partners, Rohirrim is further establishing itself as the go-to solution provider across numerous industries and is poised for continued success.
About Rohirrim
Rohirrim’s custom-developed platform, Rohan, offers the first domain-aware generative AI purpose built for the enterprise and focused on delivering outcomes. It enables company teams to unlock value from proprietary data by securely ingesting and organizing information found in presentations, spreadsheets, proposals, whitepapers, and emails. Rohirrim is not just a technological breakthrough; it’s an ode to every enterprise striving for efficiency, every team member burdened with the mammoth task of creating technically and knowledge-dense content in your company’s voice, and every leader envisioning a seamless integration of AI without sacrificing the uniqueness of their domain.
For more information about Rohirrim and their industry-leading platform, Rohan, please visit www.rohirrim.ai.
About Insight Partners
Insight Partners is a global software investor partnering with high-growth technology, software, and Internet startup and ScaleUp companies that are driving transformative change in their industries. As of June 30, 2023, the firm has over $80B in regulatory assets under management. Insight Partners has invested in more than 800 companies worldwide and has seen over 55 portfolio companies achieve an IPO. Headquartered in New York City, Insight has offices in London, Tel Aviv, and Palo Alto. Insight’s mission is to find, fund, and work successfully with visionary executives, providing them with tailored, hands-on software expertise along their growth journey, from their first investment to IPO. For more information on Insight and all its investments, visit insightpartners.com (Source: BUSINESS WIRE)
04 Dec 23. Blue Halo Acquires SDR Provider Ipsolon Research.
BlueHalo, a leading provider of critical capabilities and technologies across Space, Air, and Cyber domains, today announced it has acquired Ipsolon Research (“Ipsolon” or the “Company”). BlueHalo is a portfolio company of Arlington Capital Partners (“Arlington“), a Washington, D.C.-area private equity firm with extensive experience investing in regulated industries. Financial terms were not disclosed.
Founded in 2018, Ipsolon designs and manufactures high-performance, ultra-small form factor Software Defined Radios (“SDR”) for use in mission-critical spaces constrained by harsh environments. Ipsolon’s flagship SDR products include Cerberus, which offers leading functionalities and features in a small form factor that is made for movement on both land and air and Chameleon, which provides substantial processing and multi-antenna capabilities in a single SDR module. Ipsolon’s defense-grade equipment and specialization in ultra-small form factor SDRs allow for various use cases in military applications. Ipsolon’s reputation and ability to deliver rapid prototyping of SDR hardware and software for SDR applications has enabled the Company to deliver its critical solutions across a broad portfolio of demanding customers throughout the Department of Defense (“DoD”), including the United States Navy and United States Air Force.
The acquisition of Ipsolon directly complements several ongoing strategic and technological initiatives at BlueHalo and will allow for expedited timeframes for rapid prototyping and product delivery while ensuring quality across the supply chain. Ipsolon’s SDRs are already deployed within several BlueHalo products, and with Ipsolon now under BlueHalo’s roof, the Company plans further to integrate Ipsolon’s SDRs across the product portfolio. Ipsolon’s proprietary hardware and software, coupled with BlueHalo’s existing technology, will allow the combined enterprise to deliver a superior suite of products to support the warfighter in the ever-evolving next-generation battlefield.
“As SDRs continue to become more critical and ubiquitous in the development of next-generation technology across the full portfolio of BlueHalo’s products, Ipsolon stood out as a perfect fit to further accelerate our mission and create efficiencies for our customers, deliver rapid capabilities, and facilitate increased creativity by having in-house SDR capabilities,” said Jonathan Moneymaker, Chief Executive Officer of BlueHalo. “We are incredibly excited to bring Ipsolon into BlueHalo and provide an integrated and superior set of solution offerings to our customers as we seek to continue innovating at mission speed.”
David Wodlinger, a Managing Partner at Arlington Capital Partners, said, “In today’s increasingly volatile global risk environment, rapid innovation in defense technology is critical for the national security community. Adding Ipsolon’s cutting-edge SDR technology and agile engineering workforce to BlueHalo will allow the company to accelerate its product development lifecycle.”
John Shanton, CEO and Founder of Ipsolon, shared, “We are incredibly excited to partner with BlueHalo as we continue to deliver innovative solutions to our customers. Joining BlueHalo will allow us to deliver an expanded set of capabilities and resources to both new and existing customers as we focus on achieving an even greater mission impact. We’re thrilled to continue to push boundaries and deliver critical SDR technology and capabilities to the warfighter with BlueHalo.”
Henry Albers, a Vice President at Arlington Capital Partners, said, “John is a respected thought leader in the SDR industry and will be a key member of the BlueHalo team going forward as we look to advance our adaptive phased array technologies. We are excited to welcome the entire Iposlon team to the company and look forward to incorporating their technology and expertise in many of our core programs.”
About BlueHalo
BlueHalo is purpose-built to provide industry-leading capabilities in Space, cUAS, Autonomous Systems, and Cyber domains. BlueHalo focuses on inspired engineering to develop, transition, and field next-generation capabilities to solve the most complex challenges of our customers’ critical missions and reestablish our national security posture in the near-peer contested arena. www.bluehalo.com
About Arlington Capital Partners
Arlington Capital Partners is a Washington, DC-area private equity firm that has managed approximately $7bn in capital commitments. Arlington is focused on middle-market investment opportunities in growth industries, including aerospace & defense, government services and technology, healthcare, and business services and software. The firm’s professionals and network have a unique combination of operating and private equity experience, enabling Arlington to be a value-added investor. Arlington invests in companies in partnership with high-quality management teams motivated to establish and/or advance their company’s position as a leading competitor in their field. For more information, visit Arlington Capital’s website at arlingtoncap.com and follow Arlington on Linkedin. (Source: https://cuashub.com/)
04 Dec 23. Thales completes the acquisition of Imperva, creating a global leader in cybersecurity.
- With the integration of Imperva starting in January, Thales will help organizations discover and protect sensitive data anywhere, manage access and secure all paths to it
- North America is now the second largest country of operations for Thales
- Imperva is Thales’ ninth acquisition in the digital security area over the last nine years, and the second largest in the Group’s history after Gemalto
Thales (Euronext Paris: HO) announces today that it has completed the acquisition of Imperva, earlier than expected (previously foreseen at the beginning of 2024). This is a key milestone for Thales, creating a global leader in cybersecurity, with more than 5,800 cybersecurity experts across 68 countries and €2.4bn in cybersecurity revenue expected in 2024, including civil and defence activities, with double-digit growth expected thereafter. This transaction will generate significant value creation for Thales’ shareholders in line with the targets communicated in July 2023, when announcing the acquisition. In addition, the profile of Thales’ Digital Identity and Security (DIS) activity will be significantly enhanced with new financial targets by 2027 (2024-2027 organic sales growth of +6 to +7% and 2027 EBIT margin at 16.5%).
Patrice Caine, Chairman and Chief Executive Officer of Thales, said: “The acquisition of the US company Imperva is an important day for Thales, as it marks a new step in the expansion of our global cybersecurity capabilities for enterprises and governments around the world. We are very excited to welcome the Imperva teams to Thales. The combination of our entities’ values and our joint commitment to a future of trust will create significant synergies, business opportunities and major market innovations. With ever-increasing cyber threats against business and government digital infrastructure, Thales is now uniquely positioned to help customers protect the heart of their digital ecosystem: applications, data and identities.”
Data-Centric Security spanning across Applications, Data and Identities
Together, Thales and Imperva will help customers address cybersecurity challenges that have increased rapidly in frequency, severity, and complexity, with the most comprehensive solutions for the broadest range of application, data security, and identity use cases. These three market segments combined are forecasted to grow significantly in the coming years. According to analysts’ forecast, worldwide end-user spending is projected to total around $20 bn in 2024.
With the addition of Imperva, Thales’ expanded cybersecurity portfolio now offers a highly complementary combination of solutions to help customers secure applications, data and identities across their entire digital ecosystem:
- Application Security: Unified protection for every application and API in the cloud, on-premises, or in a hybrid model. The market leading product suite includes Web Application Firewall (WAF), Distributed Denial of Service attack (DDoS) Protection, Advanced Bot Protection, Application Programming Interface (API) Security, a developer-friendly Content Delivery Network (CDN), and Runtime Application Self-Protection (RASP).
- Data Security: Protection and control of access to sensitive data anywhere whether at rest, in motion or in use. The product suite includes the CipherTrust Data Security Platform, Imperva Data Security Fabric, as well as the Luna and payShield Hardware Security Modules, often used as the root of trust for cryptographic operations.
- Identity & Access Management: seamless, secure and trusted access to applications and digital services for customers, employees and partners. The product suite includes the OneWelcome Identity Platform and SafeNet Trusted Access.
“As a long-standing partner of both Thales and Imperva, we at Exclusive Networks are delighted with the combination of two companies that we know and value,” said Jesper Trolle, CEO Exclusive Networks. “This acquisition marks a key step in Thales’ ambition to become a global leader in cybersecurity, reinforcing its strength in data security and expanding into the buoyant application security market. With this new combined value proposition, Thales will be uniquely positioned to offer even more innovative and effective solutions to address the growing security and compliance challenges faced by organisations around the world.”
This is Thales’ ninth acquisition in the digital security area over the last nine years, and the second largest in the Group’s history after Gemalto, world leader in digital security. After the completed acquisitions of Tesserent, the leading player in cybersecurity in Australia, S21sec & Excellium, two major players in cybersecurity consulting, integration and managed services in Europe, and OneWelcome, a European leader in Customer Identity and Access Management, the integration of Imperva within Thales will position the Group’s cybersecurity business as one of the top 5 global leaders in cybersecurity.
04 Dec 23. Defence and first responder AI support tech startup Arkeus raises $4.45m. A Melbourne-headquartered artificial intelligence (AI) tool that gives defence personnel and emergency responders better situational awareness has raised $4.45m, with the seed round giving Arkeus the opportunity to scale manufacturing of its hyperspectral optical radar (HS-OR) technology.
Main Sequence led the seed round for optical autonomy company Arkeus with participation from Steve Baxter from Beaten Zone Venture Partners and Salus Ventures.
Arkeus is developing AI-powered hardware for autonomous drones and aircraft, designed to give customers the ability to ‘see’, understand and act on their environment in real time.
“In high consequence situations where every second counts, defence and emergency responders are often hampered by outdated sensors built for a narrow range of light wavelengths,” says Arkeus CEO and co-founder Simon Olsen.
“Arkeus is pioneering a new way of sensing, built from the ground up to overcome these limitations and deliver mission-critical information at the point of contact.”
Arkeus was founded three years ago by Olsen, a defence expert, and aerospace engineer Dr Jonathan Nebauer after witnessing the challenges posed by existing equipment. Since then the company has secured multiple defence contracts for its autonomous optics technology, validating the company’s approach and unlocking opportunities across both public sector and commercial applications.
“We saw an opportunity to build something new — hardware-enabled software,” says Dr Nebauer.
“Our technology is customised and optimised to operate in the most adverse conditions, with minimal to no human involvement. Our job is to extract the hardest to get information from the most challenging environments, quickly.”
Beyond defence, the company’s AI-powered customisable systems can be applied to tasks like disaster recovery, search and rescue missions, border security, and more.
“We were impressed by Arkeus’ ability to build a thriving company in Melbourne during the COVID-19 pandemic,” says Main Sequence investment manager Alezeia Brown.
“In a short time, they have developed market-leading products, secured major contracts, and shown the versatility to solve operational needs in both defence and commercial sectors.
“Their novel approach of combining hyperspectral imaging, radar, and AI has tremendous potential to save lives by giving first responders greater situational awareness.”
Beaten Zone Venture Partners founder and investor Steve Baxter says Arkeus has already demonstrated itself as a standout Australian company providing crucial, cutting-edge technology for defence worldwide.
“Simon, Jonathan and the entire Arkeus team should be immensely proud of the advancements they have achieved so far,” Baxter says.
“As their growth continues, Beaten Zone Venture Partners looks forward to remaining strong partners and champions of Arkeus’ groundbreaking work into the future.”
Salus Ventures managing director Mike Ferrari describes Arkeus as a leader in its field thanks to rapid innovation and domain expertise.
“Arkeus’ autonomous optical systems have the potential to revolutionise the search, intelligence, surveillance, and reconnaissance landscape, providing critical information in challenging environments,” Ferrari says. To support its continued growth, Arkeus is also actively hiring additional technical staff in mechatronics and engineering at its Melbourne headquarters. (Source: Google/https://www.businessnewsaustralia.com/)
01 Dec 23. Morgan Stanley Cautious About Boeing Prospects. Boeing Co.: Chase the Momentum or Curb Your Enthusiasm? We see tactical opportunity for Boeing in the near-term, but continue to see risk reward balanced in the long-term. We still see risk to consensus FCF in 2025 and 2026. Reiterate EW-rating and PT of $220.
No News is Good News, but is it a Buying Opportunity?
Recently, we’ve been fielding an uptick in investor interest if now is the time to buy Boeing. Some investors are pointing to recent delivery momentum and lowered consensus outlook for 2024 free cash flow (FCF) estimates as catalysts to begin accumulating BA shares. After trough share price of $177.73 on October 25, 2023, the stock price has been up 26.3% vs. the S&P 500 of up 8.7%.
However, YTD, Boeing shares are up 17.8% vs. the S&P 500 of up 18.5%. After a challenging summer of multiple non-conforming manufacturing issues on the 737 MAX program (Thoughts About the Recent Boeing 737 MAX Issues and Another 737 MAX Quality Issue), the lack of incremental bad news has been positive for the stock. Additionally, tailwinds from aircraft orders from the Dubai Air Show (Flyby: Recent Boeing Headlines) and the 737 MAX 10 flight certification flights have been positive for sentiment. We see near-term tactical positive positioning for Boeing through 2023 year-end.
Downside Risk to 2025 and 2026 Consensus FCF
Despite the potential for positive momentum for Boeing shares, we continue to see balanced risk reward in the long-term. Supply chain bottlenecks continue to persist, which limit Boeing’s ability to deliver aircraft and monetize its multi-year backlog and a 2024 labor agreement negotiation with the IAM District 751 is an overhang. We continue to see downside risk to consensus free cash flow estimates largely due to lower than consensus estimates on BCA and BDS margin.
We note that our base case scenario does not factor in a labor strike. Consensus is currently forecasting FCF of ~$9.6bn and ~$11.7bn in 2025-2026 compared to MS estimates of ~$8.4bn and ~$9.2bn. Historically, Boeing shares traded at around 15x P/FCF during a commercial aerospace upcycle. At consensus estimates, Boeing shares are trading at an implied multiple of ~13.7x 2025 FCF and ~11.4x 2026 FCF. At MS estimates, Boeing shares are trading close to fuller value at ~16.2x 2025 FCF and ~14.9x 2026 FCF.
A Boeing Strike as the Largest Potential Risk for 2024
Boeing’s labor agreement with its IAM District 751 members expires at midnight on September 12, 2024. The labor agreement represents ~30k workers in the Washington state area which work at major Boeing locations like Renton, WA and Everett, WA represents about 20% of Boeing’s total workforce. We see the risk of a strike as largely underappreciated by the market. Production disruption could negatively affect Boeing’s ability to ramp-up aircraft production and manage its costs.
MS View: “Curb Your Enthusiasm”
With Boeing shares trading at a fuller valuation using MS estimates, we maintain our Equal-weight rating. We note that Boeing’s historical upcycle multiple of ~15x P/FCF was in the period in which Boeing was generating annual FCF of ~$7bn to ~$13.6bn, returning close to 100% of FCF to shareholders, and operating at a net cash or very low net debt levels. With Boeing still operating at net debt levels of $31.5bn in 2024, $23.3bn in 2025, and $14.6bn in 2026, we see limited capacity for capital return to shareholders.
MSe vs. Consensus
We remain below consensus on 2025 and 2026 FCF estimates as we expect lower 737 MAX production rates, lower BCA operating profit, and lower BDS operating profit. We estimate a slower ramp in 737 MAX production rates as we expect the supply chain to continue to play a factor, while lower volumes will impact margins. We continue to expect headwinds in defense as execution remains challenged with ~40% of the portfolio.
About the IAM District 751
The International Association of Machinists and Aerospace Workers (IAM) has ~600k active and retired members and is one of the largest labor unions in North America. The last agreement between the IAM District 751 and Boeing was at the end of 2013 when Boeing re-opened a prior agreement, which was not expected to expire until 2016. The re-opened agreement resulted in concessions from IAM members including a freeze in pension contributions and a conversion to a 401(k)-style savings plan instead and additional healthcare costs. Members received a modest wage increase (details in contract) in return for production of the 777X program to remain in Washington state.
In our view, considering the significant bargaining power of labor unions in other industries like autos and airlines, we expect to see the IAM District 751 union negotiations to be challenging for Boeing. For historical context, the machinist union has engaged in strikes with Boeing before: engaged in a ~8 week strike in 2008, ~4 week strike in 2005, and ~10 week strike in 1995.
737 MAX 7 and 737 MAX 10
Last week on Wednesday November 22nd, Boeing acknowledged the FAA had cleared it to begin certification flight testing of its 737 MAX 10 aircraft. Boeing expects the MAX 10 to be certified and have its first aircraft delivery in 2024. Boeing expects the 737 MAX 7 aircraft to be certified by year end and first delivery to occur in 2024.
(Source: https://www.defense-aerospace.com/ Morgan Stanley)
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SPX CommTech, part of SPX Technologies Inc, innovates specialised technologies within the Radio Frequency (RF) spectrum to ensure a smarter, more secure future for all. Formed by TCI and ECS, SPX CommTech’s Battlespace portfolio enables defence and security teams to detect, defeat and exploit RF signals to enhance communications intelligence (COMINT) and counter unmanned aerial systems (Counter-UAS). Additionally, its Tactical Data Link portfolio allows intelligence gathering agencies, special forces, emergency response, and security teams to securely and reliably transfer video and data between enabled-aircraft and ground teams over long distances for airborne Intelligence, Surveillance, Reconnaissance (ISR). For more information visit www.tcibr.com and www.enterprisecontrol.co.uk
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