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10 May 24. Space offers new frontier for Filtronic.

A deal with Elon Musk’s SpaceX could reignite the company’s fortunes.

Filtronic’s (FTC) announcement of a strategic agreement with Elon Musk’s SpaceX late last month drove a one-day share price pop of almost 50 per cent. This is understandable. Working with the world’s most advanced space technology company is a coup, but some investors with longer memories will remain unimpressed. Filtronic has been here before, enjoying a stellar rise on the back of the dotcom boom before experiencing an equally rapid descent.

The communications equipment specialist was founded by a former electrical engineering lecturer at the University of Leeds, David Rhodes, in the late 1970s. It initially made components for the RAF’s Tornado aircraft and used an Aim listing in 1994 to grow via acquisitions. By 2000, it had become one of the UK’s most successful university spin-outs, with revenues of over £200mn and a market cap in the billions.

But it had ‘bet the farm’ on wireless network technology, in the words of current chief executive Richard Gibbs, and this market collapsed during a lull between the rollouts of 3G and 4G technology.

So, too, did the company’s share price. Over a 20-month period, Filtronic’s shares lost 99 per cent of their value. A dramatic downsizing ensued, and on many measures, the company remains a shadow of its former self. Turnover last year was just £16.3mn, and even after its recent run-up, its market cap has only just topped £100m.

It is much more focused, though. Having got out of businesses that Gibbs says became “commoditised”, such as the production of telecoms antennas, it is now concentrated on four end markets – aerospace and defence, critical communications, telecoms infrastructure and space. Its engineers have skills that are hard to replicate, designing and manufacturing filters, transceivers and amplifiers of very low radio frequencies (RFs).

“We know where we can excel, and that’s in the non-trendy, hard-to-do analogue bit of engineering where it’s not just applying ones and zeros,” Gibbs said. “It’s accumulated knowledge of how to design very low frequencies and filter out any frequencies you don’t want.”

These skill sets are not widely held, as few universities still train RF engineers, Gibbs said. Their rarity can be vouched for by the fact that SpaceX – a company not known for its love of working with external suppliers – is partnering with it.

This came about because Filtronic had worked with other tech companies such as Meta (US:META) and Alphabet (US:GOOG) on their low-earth orbit projects, which they later abandoned. Some of the engineers on those projects now work at SpaceX and knew Filtronic could build the kit they needed to send signals to and from Starlink satellites to ground stations.

The SpaceX deal

SpaceX placed its first £2.3m order for Filtronic’s E-band solid state power amplifiers (SSPAs) last year, although confidentiality agreements were in place then. As other deals followed, and Filtronic became a critical supplier, SpaceX formalised the relationship.

It has done this through an agreement that grants it warrants for up to 10 per cent of Filtronic’s shares. Half of these will vest once SpaceX has bought $37m (£30m) worth of E-band SSPAs, and the other half will once a similar size of orders is placed for amplifiers operating at other frequencies.

“We’ll get to 5 per cent fairly quickly,” Gibbs asserted, given that SpaceX has just placed its fifth order for E-band SSPAs worth $19.7m. These will be delivered in Filtronic’s next financial year, which begins in June. The other 5 per cent will vest once equipment for other frequencies is manufactured, which could take around 12-18 months.

House broker Cavendish believes this deal will mark a step change in the company’s fortunes. It is forecasting revenue growth of 50 per cent this year to £24.5mn, and a similar magnitude next year to £36m. Adjusted operating profit is estimated to rise from £237,000 last year to £3.4m this year and £6.6m next.

Filtronic’s shares have doubled in value since the start of this year and have risen four-fold over the past 12 months. They now trade at 38 times Cavendish’s forecast earnings of 1.3p a share, but this falls to 19 times based on next year’s estimate of 2.7p. (Source: Investors Chronicle)

 

10 May 24. Fincantieri to acquire UAS, Leonardo’s torpedo and sonar production line. Fincantieri will acquire Leonardo’s Underwater Armaments Systems business line for as much as €415m by early 2025.

Fincantieri will acquire Leonardo’s Underwater Armament Systems (UAS) torpedo and sonar business line in a deal that could reach €415m ($447m) by its conclusion, expected to be finalised at the beginning of 2025.

Fincantieri will acquire Leonardo’s torpedo production technologies as well as its underwater acoustic technologies, with Fincantieri intending to use the new property to grow its underwater sector, focusing on new military applications, as well as solutions for underwater civil infrastructure.

In 2023, the UAS line of business generated revenues for Leonardo of approximately €160m ($172m) and an EBITDA of € 34m ($37m). UAS also includes a 50% participation in GEIE EuroTorp established with Naval Group and Thales, which makes the MU90 light torpedo.

As part of its strategic rationale for the transaction, Fincantieri estimates the target underwater market to have a €100bn cumulative value between 2024-28, with a 15% compounded annual growth rate.

In a statement on the acquisition, Fincantieri has said that the underwater domain holds strategic importance in the Mediterranean Sea, as an area of dense critical infrastructure. Fincatieri also recognised the strength of growth in the intelligence, surveillance and reconnaissance sector as necessitating a ‘dedicated industrial focus’.

Chief executive officer of Fincantieri Pierroberto Folgiero expressed satisfaction with the deal, adding that the acquisition is a milestone in the company’s equity plans and underwater strategy for the next industrial cycle. “Underwater technological autonomy and global executive capabilities, in this new geopolitical and industrial scenario, will be the distinguishing factors that will allow Fincantieri to fully exploit Fincantieri’s potential in the interest of the Group’s industrial and financial stakeholders.”

Bottom of Form

The value of the acquisition is €300m as fixed enterprise value, with a variable component that has a maximum value of €115m based on growth assumptions for 2024. Amongst other measures, Fincantieri has suggested a reverse stock split as part of its plans to finance the acquisition.

Leonardo CEO and MG Roberto Cingolani stated: “The disposal of the Underwater Armaments Systems is part of the plan of rationalising Leonardo’s business portfolio. The initiative gives further emphasis to the cooperation between Leonardo and Fincantieri, within the framework aimed at achieving more effective defence and global competitiveness.”

UAS was originally a subsidiary known as Whitehead Alenia Sistemi Subacquei S.p.A., specialising in the construction of submarine defence systems, such as torpedos, countermeasures, and sonar systems, until Whitehead merged with Leonardo S.p.A in 2016 and came to be known as the UAS business line.  (Source: naval-technology.com)

 

09 May 24. MDA Space (TSX: MDA), a trusted space mission partner to the rapidly expanding global space industry, today announced its financial results for the first quarter ended March 31, 2024.

• Q1 2024 Highlights
• Record backlog of $3.3bn at quarter end, up 169% YoY
• Healthy top line growth with revenues of $209.1m, up 3.6% YoY
• Solid profitability with adjusted EBITDA of $42.0m and adjusted EBITDA margin of 20.1%
• Adjusted net income of $18.1 m and adjusted diluted earnings per share of $0.15
• Rebranded to MDA Space as we continue to lead in a new area of space innovation
• Reaffirmed 2024 full-year financial outlook

“We are off to a solid start in 2024. In Q1, the MDA Space team delivered another quarter of strong performance as we continued to convert our backlog and deliver on our customer commitments,” said Mike Greenley, Chief Executive Officer of MDA Space. “We also grew our book of business in Q1 and secured a number of awards including a contract to deliver the fleet of MQ-9B SkyGuardian Remotely Piloted Aircraft Systems for the Canadian Armed Forces. And subsequent to quarter end, we received a $250m contract extension from the Canadian Space Agency to continue supporting robotics operations on the International Space Station until its planned retirement in 2030. Last quarter, we also announced our rebranding to MDA Space, a natural brand evolution that further positions us to lead in a new area of space innovation. In addition, as part of our strategy to commercialize and productize our world-leading technology to meet changing market needs, we unveiled two new product brands. MDA AURORATM is our new software-defined digital satellite product line that positions us to capitalize on the market transition from analog to digital satellite technology, and MDA SKYMAKERTM is a full suite of scalable and modular space robotics and services that enables us to offer the world’s most flight-proven capabilities to any mission or application in an efficient, adaptable and highly accessible kit. We are energized by the momentum we are seeing in our business and end markets. With our backlog at a record level, the MDA Space team is laser focused on execution and delivering another successful year for customers, shareholders and our team.”

Q1 2024 HIGHLIGHTS

• Backlog of $3.3bn at quarter end continued to build and was up 169% compared to Q1 2023. The increase in backlog is driven by new order bookings including the $2.1bn Telesat Lightspeed LEO constellation award announced in 2023.
• Revenues of $209.1m in Q1 2024 were up 3.6% year over year driven by execution on our backlog and strong contributions from the Robotics & Space Operations business.
• Adjusted EBITDA of $42.0m in Q1 2024 compared to $48.9m in Q1 2023, representing a decrease of $6.9m (or 14.1%) year over year. Adjusted EBITDA margin of 20.1% in Q1 2024 is consistent with the Company’s full year margin guidance of 19-20% and compares to adjusted EBITDA margin of 24.2% reported in Q1 2023. The year over year change was largely in line with the variance in gross margin over the same period driven by evolving program mix.
• Q1 adjusted net income was $18.1m compared with $26.5m for Q1 2023, representing a decrease of $8.4m (or 31.7%) year over year driven by the aforementioned gross profit variance. Adjusted diluted earnings per share of $0.15 in Q1 2024 compared to $0.22 in Q1 2023.
• Operating cash flow was an inflow of $24.7m in Q1 2024 compared with $45.8m in Q1 2023. The year over year decrease in operating cash flow was primarily driven by higher working capital requirements in Q1 2024 versus the same period last year.
• At quarter end, net debt to adjusted EBITDA ratio was 2.6x driven by investment in our growth initiatives.

2024 FINANCIAL OUTLOOK

As a trusted mission partner and leading global space technology provider, we are leveraging our capabilities and expertise to execute on targeted growth strategies across our end markets and business areas. Our strategic initiatives, which span across our three businesses, include investing in next generation space technology and services, expanding our presence in high growth markets and geographies, scaling and expanding skills, talent and operations to meet current and future market demand and leveraging strategic M&A to complement organic growth. We continue to make good progress against our long term strategic plan.

MDA is well positioned to capitalize on strong customer demand and robust market activity given our diverse and proven technology offerings. Our growth pipeline is significant and underpinned by existing and new programs and our book of business is healthy. We see activities ramping up in line with our expectations, and are encouraged by the team’s solid execution.

For fiscal 2024, we reaffirm the previous outlook provided in our Q4 2023 earnings release and continue to expect full year revenues to be $950 – $1,050m, representing robust growth of approximately 25% at the mid-point of guidance compared to 2023 levels. We expect revenue growth to accelerate in the second half of 2024 as we ramp up work volumes on a number of programs. We continue to expect full year adjusted EBITDA to be $190 – $210m, representing approximately 19% – 20% adjusted EBITDA margin. We reaffirm our expectations that capital expenditures will be $210 – $230 m in 2024, comprising primarily of growth investments to support CHORUS and the previously outlined growth initiatives across our three business areas.

For Q2 2024, we expect revenues to be $215 – $225m as we continue to execute on our backlog. (Source: PR Newswire)

 

09 May 24. BAE Systems continues to benefit from higher defence spending. BAE Systems (BA.) has said the recent passing of a $95bn supplemental aid package by the US government for Ukraine and the UK government’s renewed commitment to spend 2.5 per cent of GDP on defence “should build further positive momentum” in terms of its order intake.

The defence contractor highlighted a series of recent contract wins in a trading update, including more than $1bn-worth of orders from the US army for multi-purpose vehicles and self-propelled howitzers and a $650mn deal with Denmark to upgrade and maintain a fleet of CV90 tanks.

Full-year guidance remains unchanged, with the company expected to deliver double-digit increases in sales and underlying operating profit, and to generate free cash flow of at least £1.3bn – even after stepping up spending on capex and research.

A £1.5bn buyback programme that began in 2022 is now 90 per cent complete, and the company will soon kick off a second £1.5bn round that was approved by its board last year.

The question for investors is whether buybacks now represent the most efficient use of cash, given the 130 per cent increase in the company’s share price since the war in Ukraine began. On some measures, BAE Systems’ valuation already looks quite full – its shares trade at 20 times forecast earnings, compared with a five-year average of 13 times. Its dividend yield has fallen from its five-year average of 3.6 per cent to just 2.2 per cent. It was clearly undervalued in the past, though, and the growth in orders shows no signs of slowing. Consensus forecasts show earnings picking up, meaning analysts expect the price/earnings (PE) ratio to fall to 18 times next year and 16 times in 2026.

Last IC view: Hold, 1,217p, 21 Feb 2024. (Source: Investors Chronicle)

 

09 May 24. BAE Systems plc will hold its Annual General Meeting today at 9.30 a.m.  At the meeting, Chair, Cressida Hogg, and Chief Executive, Charles Woodburn, will comment on the performance of the Group in 2023, as detailed in the Preliminary Results Announcement published on 21 February 2024. Additionally, BAE Systems plc provides the following update on trading in the year to date.

Charles Woodburn, BAE Systems Chief Executive, said:  “Trading so far this year has been in line with expectations. Operational performance continues to be strong and our backlog and programme incumbencies underscore our confidence in our long-term value-creating model.  We’re continuing to deliver on mission critical requirements for our customers, and progress our long-term strategic programmes within the elevated threat environment. We have commenced the integration of our new Space & Mission Systems business in the US following the closing of the Ball Aerospace acquisition in February. Our global presence and diverse portfolio of products and services provide high visibility for top-line growth, margin expansion and cash generation in the coming years.”

Guidance

The Group’s full year 2024 guidance is unchanged from that contained in the Preliminary Results Announcement published on 21 February 2024.

• Sales +10% to +12% (2023: £25,284m)
• Underlying EBIT +11% to +13% (2023: £2,682m)
• Underlying EPS  +6% to +8% (2023: 63.2p)
• 2024 Free Cash Flow (FCF) >£1.3bn
• Cumulative FCF 2024-2026  >£5bn
• Guidance is provided on the basis of an exchange rate of $1.24:£1 for the year
• Sensitivity to EPS is around 1.3 pence for every 5 cent movement

Increasing exposure to major defence growth markets

The Australian Government’s selection of BAE Systems and ASC Pty Ltd to build Australia’s new fleet of nuclear powered submarines is the latest significant development in the AUKUS trilateral security pact between the United States, the United Kingdom and Australia.

Under the AUKUS agreement, Australia and the UK will operate a common submarine of the future, incorporating technology from all three nations, based on the UK’s next generation design, which BAE Systems is leading.  In 2023, we received c.£4bn of order intake to enable the UK programme to transition into the detailed design phase and commence procurement of long-lead items and supporting infrastructure.

BAE Systems and ASC Pty Ltd will now combine their complementary skills, expertise and capabilities under a collaborative arrangement in Australia, ultimately leading to the establishment of an incorporated Joint Venture.

With our global presence and wide portfolio of high-end technologies and services, any further expansion of the current AUKUS programme would enhance our long-term opportunity pipeline.

Order Intake

Defence spending is high across our sectors and key markets. The recent passing of the US supplemental aid package to Ukraine and the commitment by the UK Government to spend 2.5% of GDP by 2030 should build further positive momentum.

Notable awards received to date include:

• Armored Multi-Purpose Vehicles – $754m award for a second full rate production order
• CV90 Denmark – awards for upgrades and maintenance services collectively amounting to over $650m.
• M109 Self-Propelled Howitzers – up to $318m for technical and sustainment support
• Amphibious Combat Vehicles – awards received collectively over $200m
• Geospatial-Intelligence Enterprise Modelling Services – Electronic Systems announced an IDIQ contract worth up to $182m from the US National Geospatial-Intelligence Agency
• GeoXO Atmospheric Composition Instrument – $365m contract from NASA for the National Oceanic and Atmospheric Administration for Space & Mission Systems to develop and build a new instrument to monitor global air quality
• MBDA domestic and export awards
• The UK MoD has awarded BAE Systems a contract to maintain and repair gifted L119 Light Guns in Ukraine.

Space & Mission Systems integration

We completed the acquisition of Ball Aerospace on 16 February and renamed the business Space & Mission Systems. The integration programme is underway and the business has had a good start to the year, securing a number of key contracts. There were successful launches of multiple satellites with BAE Systems-built instruments: MethaneSAT will provide reliable scientific data about the sources and scale of methane emissions globally to help drive reductions in the future; and the Weather System Follow-on – Microwave (WSF-M) satellite will bridge critical gaps in current space-based environmental monitoring capabilities for the US Space Force.

Evolving the business for long-term growth

In support of our growth outlook and to help meet our customer aspirations, we are investing in our people, facilities and technology. In 2024, in the UK, our ambition is to hire a record 2,700 new apprentices, graduates and undergraduates.

Self-funded R&D is expected to rise with investments in high technology areas such as electronic warfare, autonomy, laser directed weapons, counter UAS, synthetic training, electrification applications and space solutions.

Capital expenditure is expected to rise compared to 2023, with capital expenditure focused on maritime, munitions and our Swedish combat vehicle production capacity and capabilities. These investments are all included within our rolling 3-year cash guidance.

Capital Distributions

The 2023 final dividend of 18.5 pence per share will be paid, subject to shareholder approval, on 3 June 2024.

We have completed over 90% of the three-year share buyback programme of up to £1.5bn, which commenced in July 2022.

In addition, in August 2023, the Board approved a further share buyback programme of up to £1.5bn which is expected to commence after completion of the current programme and conclude within three years of its commencement.

2024 Interim results

BAE Systems will announce its interim results for the half year ending 30 June 2024 on 1 August 2024.

 

08 May 24. VSE Corporation Announces First Quarter 2024 Results.

VSE Corporation (NASDAQ: VSEC, “VSE”, or the “Company”), a leading provider of aftermarket distribution and repair services, announced today results for the first quarter 2024.

FIRST QUARTER 2024 RESULTS(1)

(As compared to the First Quarter 2023)

• Total Revenues of $241.5m increased 28.1%
• GAAP Net Income of $12.1m increased 49.0%
• GAAP EPS (Diluted) of $0.76 increased 20.6%
• Adjusted EBITDA(2) of $32.3m increased 36.7%
• Adjusted Net Income(2) of $13.9m increased 50.2%
• Adjusted EPS (Diluted)(2) of $0.87 increased 22.5%

1 From continuing operations

2 Non-GAAP measure. See additional information at the end of this release regarding non-GAAP financial measures

MANAGEMENT COMMENTARY

“We completed the first quarter of 2024 with record financial results,” said John Cuomo, President and CEO of VSE Corporation. “Our Aviation segment reported 43% revenue growth and record Adjusted EBITDA margins of 17% in the quarter. The Aviation segment’s robust results were supported by strong execution on recently awarded distribution and MRO agreements, the introduction of new product and service capabilities, the launch of a newly acquired OEM licensed manufacturing program, and contributions from the Desser Aerospace acquisition. Our Fleet segment continued to diversify its customer base, driving strong growth in commercial and e-commerce customers, offset by a near-term decrease in maintenance activity within the United States Postal Service.”

Mr. Cuomo continued, “As previously communicated, our 2024 focus is program implementation and execution. This involves the expansion of a recently announced agreement with Pratt & Whitney Canada to support Europe, Middle East, and Africa (“EMEA”), the launch of the newly acquired OEM licensed manufacturing program, and the integration of newly acquired businesses. As we embark on this transformation and with our continued focus on aviation aftermarket expansion, I am confident in our team’s ability to execute these strategic initiatives while continuing to drive above-market revenue growth and improved profitability.”

STRATEGIC UPDATE

• TURBINE CONTROLS ACQUISITION: On April 24, 2024, VSE completed the acquisition of Turbine Controls, Inc. (“TCI”), a leading provider of aftermarket maintenance, repair and overhaul (“MRO”) support services for complex engine components, as well as engine and airframe accessories. VSE acquired TCI for a total consideration of approximately $120 m, comprising $110 m in cash and $10m of common shares of the Company, subject to working capital adjustments. TCI expands VSE’s OEM-authorized repair capabilities and increases VSE’s exposure to the commercial aviation market. In early May, the TCI team accepted a key supplier award from Collins Aerospace, exemplifying TCI’s commitment to excellence and program execution.
• AVIATION NEW PROGRAM EXECUTION AND ACQUISITION UPDATE:

o The launch of the Pratt & Whitney Canada EMEA program, announced in the fourth quarter of 2023, remains on track with the opening of a new distribution facility in Hamburg, Germany, and the initial shipments to customers in the first quarter.

o The Honeywell Fuel Controls program, announced in the fourth quarter of 2023, is outpacing early expectations, contributing to margin growth in the first quarter. The expansion of the Aviation segment’s Kansas facility, the future center of excellence for the fuel control program, is on track to be operational by the end of this year.

o During the first quarter, VSE Aviation expanded and renewed an OEM engine accessory part distribution agreement for 10-years, valued at approximately $175m over the life of the program.

o The integration of Desser Aerospace is in process and remains on track to be completed over the next twelve-months, and is expected to drive revenue growth and margin expansion.

• FEDERAL AND DEFENSE DIVESTITURE AND CORPORATE RESTRUCTURING: In February 2024, VSE completed the sale of substantially all of its Federal and Defense segment (“FDS”) operating assets. The FDS sale was completed for a total cash consideration of $44.0m, subject to post-closing adjustments. In the first quarter of 2024, we recognized an $18.7m loss, net of tax, related to the FDS separation, which includes a non-cash loss on the FDS Sale, other FDS impairment, and loss from FDS operations and other one-time transaction expenses. As previously disclosed, the Company expects to recognize additional restructuring charges ranging from $15 to $18m related to certain corporate restructuring initiatives as we complete all transition work by the end of 2024.

FIRST QUARTER SEGMENT RESULTS

Aviation segment revenue increased 43% year-over-year to a record $162.4 m in the first quarter of 2024. The year-over-year revenue improvement was attributable to strong program execution of new and existing distribution awards, increased MRO activity, and contributions from recent acquisitions. On an organic basis, revenue increased approximately 20%, as compared to the prior-year period. Aviation distribution and repair revenue increased 38% and 58%, respectively, in the first quarter of 2024, versus the prior-year period. The Aviation segment reported operating income of $22.3m in the first quarter, compared to $15.7 m in the same period of 2023. Segment Adjusted EBITDA increased by 46% in the first quarter to $27.7m, versus $18.9m in the prior-year period. Adjusted EBITDA margin was 17.0%, an increase of approximately 30 basis points versus the prior-year period, driven primarily by favorable price and product mix, along with strong MRO revenue growth.

Fleet segment revenue increased 5% year-over-year to $79.2m in the first quarter of 2024. Revenue from commercial customers increased 37% on a year-over-year basis, driven by growth in e-commerce fulfillment and commercial fleet sales. Commercial revenue represented 56% of total Fleet segment revenue in the period. Revenue from the United States Postal Service (“USPS”) declined approximately 19% on a year-over-year basis. This revenue decline was primarily driven by USPS’ transition to a new Fleet Management Information System, which is expected to be completed in the third quarter of 2024, resulting in a temporary reduction in maintenance related activity and parts usage. The Fleet segment reported operating income of $6.6m in the first quarter, compared to $5.9m in the same period of 2023. Segment Adjusted EBITDA decreased 7%year-over-year to $7.5m, and Adjusted EBITDA margin declined approximately 130 basis points to 9.5%, primarily driven by customer and product mix.

FINANCIAL RESOURCES AND LIQUIDITY

As of March 31, 2024, the Company had $175m in cash and unused commitment availability under its $350m revolving credit facility maturing in 2026. As of March 31, 2024, VSE had a total net debt outstanding of $471m. Pro forma net leverage was approximately 3.7 times EBITDA as of the end of the first quarter.

Following the acquisition of TCI in April 2024, VSE’s pro forma net leverage ratio is expected to be approximately 4.1 times. Pro forma net leverage is expected to be below 4 times by year-end, driven by free cash flow generation in the second-half of the year.

GUIDANCE

VSE is increasing its full-year 2024 revenue growth and Adjusted EBITDA margin guidance for its Aviation segment. The guidance is as follows:

• Aviation segment full-year 2024 revenue guidance range is increasing from 24% to 28% to 34% to 38% growth, as compared to the prior year, to reflect both current business performance and current year contributions from the recent TCI acquisition.
• Aviation segment full-year 2024 Adjusted EBITDA margin guidance range is increasing from 15% to 16% to 15.5% to 16.5%.

VSE is revising its full-year 2024 revenue growth and Adjusted EBITDA margin guidance for its Fleet segment. The new guidance is as follows:

• Fleet segment full-year 2024 revenue guidance range is decreasing from 13% to 17% to a 0% to 5%, as compared to the prior year. The USPS has decided to migrate all of their vehicle maintenance facilities to a new Fleet Management Information System (“FMIS”) in 2024, which is resulting in a temporary decline in the number of transactions processed at converted facilities. To date, the USPS has migrated one-third of their facilities to this new system and expects to convert the remaining facilities by the end of the third quarter of 2024. As a result, the Company expects USPS revenue to decline 30% to 35% for the full year 2024, offset by an approximate 40% increase in commercial revenue. The USPS recovery following this temporary decline is anticipated to begin in the fourth quarter of 2024.
• Fleet segment full-year 2024 Adjusted EBITDA margin guidance is 6% to 8%, driven by lower USPS sales volume and an increased mix of commercial customers. (Source: BUSINESS WIRE)

 

08 May 24. BlackSky Reports First Quarter 2024 Results.

Q1 Total Revenue Increases 32% Over Prior Year Period

Company Wins $30m in New Contracts and Renewal Agreements

BlackSky Technology Inc. (“BlackSky” or the “Company”) (NYSE: BKSY) announced results for the first quarter ended March 31, 2024.

First Quarter Financial Highlights:

• Revenue of $24.2m, up 32% from the prior year quarter
• Imagery & software analytical services revenue grew 13% over the prior year quarter
• Cost of sales, as a percent of revenue, related to imagery & software analytical services improved to 19% from 23% in the prior year quarter

“Strong execution combined with growing global demand for our space-based intelligence solutions drove a 32% increase in first quarter revenues versus the prior year period,” said Brian E. O’Toole, BlackSky CEO. “We continue to demonstrate strong operating leverage progressing toward sustainable long-term profitable growth. During the first quarter we secured a number of new contracts and renewals agreements totaling $30 m, from both U.S. and international government customers. These contract wins demonstrate how BlackSky’s advanced capabilities are relied upon every day for critical decision making. We’re seeing strong and growing demand for our Gen-3 imaging and analytic capabilities, which we plan to start launching this year.”

Recent Highlights

• Won a $24m contract with the Air Force Research Laboratory for moving target engagement services combining BlackSky’s data with multiple government ISR and other commercial data sources
• Awarded a multi-million dollar contract with a defense and intelligence customer to provide BlackSky’s advanced space-based intelligence capabilities
• Company closed over 10 six-figure contracts and renewal agreements
• Continued significant progress on Gen-3 satellites toward a planned launch later this year
• Secured a $20m commercial bank line that provides BlackSky with additional financial flexibility to fund growth initiatives and general corporate purposes

Financial Results

Revenues

Total revenue for the first quarter of 2024 was $24.2m, up $5.8m, or 32%, from the first quarter of 2023. Imagery and software analytical services revenue was $17.8 m in the first quarter of 2024, up 13% over the prior year period, primarily driven by incremental customer orders for BlackSky’s imagery services. Professional and engineering services revenue was $6.4m in the first quarter of 2024, up 143% over the prior year period. The significant year-over-year increase was primarily related to new customer wins and the execution step up of multiple major international contracts. Professional and engineering services contracts are milestone-based contracts that may have quarter-over-quarter revenue variability, in contrast to the imagery and software analytical services, which are typically recurring subscription-based revenues.

Cost of Sales(1)

Cost of sales as a percent of revenue improved to 29% for the first quarter of 2024, compared to 35% in the first quarter of 2023. Imagery and software analytical service costs as a percent of revenue improved to 19% in the first quarter of 2024, compared to 23% in the first quarter of 2023. The year-over-year improvement in imagery and software analytical service costs was primarily driven by greater volumes of revenue that inherently have a low fixed-cost structure as a percent of revenue.

(1) Cost of sales is defined as imagery and software analytical services costs and professional and engineering services cost, less depreciation and amortization expense.

Operating Expenses

Operating expenses for the first quarter of 2024 were $30.5m, which included $3.1m of non-cash stock-based compensation expense and $11.2m in depreciation and amortization expenses. Operating expenses for the first quarter of 2023 were $28.8m, which included $2.7m in non-cash stock-based compensation expense and $9.7m in depreciation and amortization expenses. Excluding the non-cash stock-based compensation and depreciation and amortization expenses from both years, cash operating expenses for the first quarter of 2024 were $16.2m, compared to cash operating expenses of $16.4m for the first quarter of 2023. The year-over-year decrease of $0.2m, or 1%, was primarily driven by reductions in general corporate costs, which more than offset investments in our go-to-market initiatives.

Net Loss

Net loss for the first quarter of 2024 was $15.8m, compared to a net loss of $17.3m in the first quarter of 2023.

Adjusted EBITDA(2)

Adjusted EBITDA for the first quarter of 2024 was $1.4m, compared to an Adjusted EBITDA loss of $4.1m in the first quarter of 2023. The $5.5m year-over-year improvement was primarily driven by strong operating leverage achieved through higher revenues, improvement in gross margins, and reductions in cash operating expenses.

(2) Non-GAAP financial measure. See “Non-GAAP Financial Measures” below and reconciliation table at the end of this press release.

Balance Sheet & Capital Expenditures

As of March 31, 2024, cash and cash equivalents, restricted cash, and short-term investments totaled $35.8m. Subsequent to the end of the quarter, the Company entered into a commercial bank line of $20m bringing total liquidity to $55.8m on a pro forma basis. In addition, a few major customer contracts include interim milestones for which revenue and costs have been recognized but have not yet been billed. Therefore, the Company anticipates receiving approximately $24m in payments from these contracts over the next 12 months, which would further enhance liquidity. Capital expenditures for the first quarter of 2024 were $14.6m.

2024 Outlook

The Company maintains its outlook for full year 2024 revenue of between $102m and $118m, and full year 2024 Adjusted EBITDA of between $8m and $16m. In addition, the Company maintains its expectations for full year 2024 capital expenditures of between $55m and $65m, primarily driven by investments in the Gen-3 satellites. (Source: BUSINESS WIRE)

 

07 May 24. Up to 300 defence companies debanked by high street lenders. Banks have shut the accounts of hundreds of defence companies amid fears that lenders’ internal ethics policies are putting national security at risk.

Santander and Lloyds closed 300 accounts belonging to “public administration and defence” companies last year alone, according to correspondence with MPs on the Treasury Select Committee.

Other major lenders did not provide a breakdown, suggesting the actual figure could be far higher.

Although some of the accounts may have been shut for other reasons such as a prolonged period of inactivity, senior industry executives also told MPs that they were concerned about the ethical implications of working with arms companies.

The disclosure triggered a backlash from defence experts and MPs.

Writing for The Telegraph, the Treasury Committee chairman and Conservative MP Dame Harriett Baldwin said: “We cannot have organisations in this country systematically debanking legitimate firms or industries because their board turns its nose up at their line of work. If their work is legal then they should be able to access a bank account.”

She added: “Banks’ shareholders demanding environmental, social and governance policies may inadvertently be putting national security at risk. This cannot go on.”

Tobias Ellwood, a former chairman of the Commons defence committee, said “well-intentioned” standards risked putting Britain’s defence capabilities into “jeopardy”.

He said: “To prevent ESG guidelines from bogging down defense procurement, standards must be tailored to the unique requirements of the industry while being clarified for ease of compliance. Let’s not allow well-intentioned ESG standards to jeopardise our defence capabilities in a dangerous world – it’s time to get this sorted.”

In a report on so-called debanking, compiled after NatWest’s closure of an account belonging to Nigel Farage triggered a national scandal, the committee found that lenders frequently rejected companies working in “undesirable” industries such as defence, pawnbroking and gambling.

Research feeding into the report earlier this year revealed that 140,000 companies had been debanked, typically with little or no notice.

At least 4,214 such instances were attributed to “risk appetite” – despite there being no consistent definition across the industry of what that meant, according to the research.

Banks also said they had closed accounts over money laundering concerns or inactivity.

Ms Baldwin highlighted businesses operating in defence as an area of particular concern, after Santander admitted to closing 280 accounts belonging to businesses it categorised as “public administration and defence: compulsory social security”.

Lloyds, meanwhile, closed 20 such accounts in sectors classed as “public administration and defence” and “aerospace and defence”.

Ms Baldwin also referred in her comment piece to evidence from Handelsbanken, a Swedish bank with more than 160 UK branches, which suggested that the industry was reluctant to work with businesses responsible for supplying the Armed Forces.

She said: “The boss of Handelsbanken couldn’t tell us if they’d give an account to BAE Systems – despite the company being one of the biggest suppliers to the Ministry of Defence.

“How on earth have we got to the position where a company working to preserve our national security can’t be assured of access to a bank account?”

The Treasury Committee report warned that damaging financial regulation and inadequate support from lenders was holding small businesses back from innovating and growing, ultimately harming the economy.

It urged the financial watchdog to force banks to be more transparent about why decisions to close bank accounts have been taken.

The research comes as small businesses increasingly struggle to access finance.

The report highlighted that the approval rate for SME applications for bank loans has tumbled from 80pc in 2018 to 50pc in 2023.

Ms Baldwin warned in her op-ed that lenders referring to risk appetite as a reason to not provide services to a firm was unsatisfactory.

She said: “There can be good reasons for closing or denying accounts for businesses, including signs of money laundering or prolonged inactivity, but we found there were still thousands of accounts being closed under the disconcertingly vague justification of ‘risk appetite’.”

The committee also said that the industry-funded Business Banking Resolution Service is failing its task to resolve disputes adequately, leaving debanked firms with little hope of being heard.

The body has settled only 58 cases while costing more than £40m to operate, according to the report.

The Treasury Committee said it agreed it should be closed down.

One of an MP’s most important responsibilities is to champion the small businesses in their patch.

I certainly take every opportunity to shout about the smaller firms in my West Worcestershire constituency.

From the fantastically successful tree-growing business Frank P Matthews to the emerging corridor of cyber technology startups, small and medium-sized businesses in my part of the world offer so much to our economy.

But there is no getting away from how tough the pandemic and energy crisis have been for those running small businesses. Critical government support has been delivered but they need to know that their banks will also support them through such a challenging period.

Our Treasury Committee asked smaller businesses up and down the country to tell us about their experiences with lenders, and I was taken aback by what we were told.

One particular issue we heard about, I’m sure in no small part thanks to the campaigning of this very newspaper, was debanking.

During our investigation, we found more than 140,000 small business accounts were closed in the last year alone – with many firms being given little or no notice before they were debanked.

There can be good reasons for closing or denying accounts for businesses, including signs of money laundering or prolonged inactivity, but we found there were still thousands of accounts being closed under the disconcertingly vague justification of ‘risk appetite’.

Representatives from the pawnbroking industry told the committee more than half of the companies in their sector couldn’t get a bank account.

Even more disturbing was when the boss of Handelsbanken couldn’t tell us if they would give an account to BAE Systems – despite the company being one of the biggest suppliers to the Ministry of Defence.

How on earth have we got to the position where a company working to preserve our national security can’t be assured of access to a bank account? Banks’ shareholders demanding environmental, social and governance policies may inadvertently be putting national security at risk. This cannot go on.

It is wrong that banks in this country can systematically debank legitimate firms or industries because their board turns its nose up at their line of work.

If their work is legal then they should be able to access a bank account. Most lenders couldn’t even tell us exactly what had been considered before the accounts were closed. Something has to change, which is why we have asked the Financial Conduct Authority to force banks to send it their debanking data – including the reason for each account closure.

Following the revelations uncovered by our inquiry, we have received assurances from the Government that they will be legislating to crack down on unfair debanking. We keenly await the opportunity to scrutinise this urgent work when it is presented to Parliament. (Source: Daily Telegraph)

 

07 May 24. Italy’s Leonardo Q1 orders, revenues rise on strong electronics, helicopters. Italy’s defence and aerospace group Leonardo (LDOF.MI), reported on Tuesday rising orders and revenue in the first quarter of 2024, both pushed by the state-controlled group’s electronics and helicopter sectors.

“We are fully focused on the execution of the industrial plan. The consolidation of the core defence business progresses very well thanks to the acceleration of the digitalisation processes, creating new revenue streams and generating cost efficiencies,” chief executive Roberto Cingolani said in a statement.

New orders rose 14.9% year-on-year in the first three months to 5.75bn euros ($6.19 bn) pro forma, or net of the full consolidation of the Telespazio joint venture, with France’s Thales (TCFP.PA), from 2024.

Revenue rose 15.3% to 3.66bn euros pro forma, driven by higher volumes in the electronics business. ($1 = 0.9284 euros) ($1 = 0.9282 euros) (Source: Google/Reuters)

 

07 May 24. Precision Aerospace Holdings, LLC Acquires Owens Machine and Tool Company. Dallas-based Precision Aerospace Holdings LLC (Precision), a leading manufacturer of precision machined aerospace and defense components, has acquired Owens Machine and Tool Company (Owens). Precision was formed through the partnership of two Dallas-based private investment firms, CIC Partners (CIC) and Juniper Capital Management (Juniper).

Owens produces complex, multifaceted parts, tooling and prototypes utilizing multi-axis machine tools and best-in-class cutting tools. It was established in 1986 to develop and sell complex machine components, primarily to the aerospace and defense industries. Owens is located in Lewisville, Texas and specializes in CNC machining of titanium and nickel alloys.

“We are thrilled to add Owens to Precision’s growing platform,” said Pete Stegmaier, Precision’s CEO. “The Owens team has deep experience that expands our broad capabilities to provide world-class service to aerospace and defense industries. We expect to continue their exciting growth trajectory.”

The transaction marks Precision’s second acquisition in less than 10 months. In June 2023, Precision acquired Decatur Machine Services, Inc. located in Decatur, Texas. The new additions build on the success of the previous two acquisitions of Applegate EDM, LLC and Icon Machine Co. in 2022. Precision now owns four companies in the Dallas-Fort Worth metroplex with a total of 110 employees. All businesses are AS9100 and ITAR certified.

“We have built an impressive platform in North Texas centered on operational excellence and a commitment to best-in-class customer performance marks,” said Bayard Friedman, Precision board chairman and managing director with CIC Partners. “These fundamental attributes will allow us to continue to scale the Precision platform and be a key supplier to a growing list of major defense programs.”

Precision will continue to aggressively target investment opportunities in North Texas and surrounding states.

“We are extremely proud of the operating companies we have assembled under the Precision platform,” said Bryan Grabowsky, co-founder and managing partner at Juniper. “The enhanced capabilities and product offerings as well as the strong operational leadership we have added with Owens will be instrumental as we continue to build on opportunities to be a value-added supplier to leading defense and aerospace companies.”

Terms of the deal were not disclosed.

Baker Botts L.L.P. represented Precision in connection with the transaction.

About Precision Aerospace

Precision Aerospace is a privately held aerospace manufacturing business focused on hard metal and tight tolerance product manufacturing for the defense and space end markets. For more information, please visit https://precisionaeroholdings.com.

About Juniper Capital Management

Juniper Capital Management is a Dallas-based private equity firm focused on investing in manufacturing, industrials, business services, and residential services companies. Juniper’s primary strategy involves supporting smaller-scale businesses (EBITDA <$8M), a space that institutional private equity has traditionally overlooked; the firm strives to create value through the investment teams’ hands-on operating experience and deep understanding of the challenges faced by business owners as they approach the next phase of growth. Juniper seeks to continue the legacies of family/founder-owned companies, partnering with management to institutionalize replicable processes, implement data-driven systems, and expand the team in preparation for scale. For additional information, please visit https://junipercapmgt.com.

About CIC Partners

CIC Partners is a middle-market private equity firm that invests in growth-oriented companies primarily in the food, restaurant, industrial, and energy industries. CIC manages the personal capital of its investment team, operating partners and strategic investors and seeks to partner with owner-operators, founders and management teams. CIC looks for opportunities where it can leverage the collective experience of its investment team and its operating partners, who are successful CEOs and entrepreneurs, to guide, support and add value to portfolio companies. Based in Dallas, Texas, the firm has been generating wealth in private equity investing for its investors and management teams for over 30 years. For additional information, please visit www.cicpartners.com.

(Source: BUSINESS WIRE)

 

07 May 24. Godspeed Capital-Backed Special Aerospace Services (SAS) Acquires Quintron Systems. Godspeed Capital Management LP (“Godspeed”), a lower middle market Defense & Government services, solutions, and technology focused private equity firm, today announced the acquisition of Quintron Systems (“Quintron”) by SAS, its recently-launched space engineering, defense, and communications technology solutions platform. The transaction marks the second addition to the growing SAS platform, following its recent acquisition of Willbrook, and reinforces SAS’ position in the space and defense markets, adding capabilities in communications systems technology for NASA, defense and commercial space clients. Concurrent with the transaction, Dominick Barry, President of Quintron Systems, will be promoted to Chief Operating Officer of the SAS platform.

Founded in 1970, and based in Santa Maria, California, Quintron provides innovative, secure communications technology solutions tailored for the space and defense markets. Quintron brings longstanding customer relationships well aligned with SAS’ strategic growth objectives specifically with NASA and select commercial space customers who rely on Quintron’s sophisticated Voice-over-IP (VoIP) communications technology to ensure integrated and uninterrupted communications in support of mission critical space launch operations.

“We are pleased to welcome Quintron to the SAS family,” said Heather Bulk, CEO of SAS. “Quintron’s strong reputation for innovation and customer satisfaction complements our values and enhances SAS’ capabilities in critical secure communications technology, enabling us to offer an even wider range of solutions to our clients in the space and defense markets.”

“Becoming part of SAS is a significant milestone for Quintron. This partnership will allow us to leverage SAS’ resources and expertise to accelerate our growth and expand our reach with existing and new customers,” remarked Mr. Barry. “We are excited to work with the SAS team to continue providing exceptional products and services to our customers and explore new opportunities together.”

Latham & Watkins LLP served as legal adviser to Godspeed Capital. The McLean Group LLC served as exclusive financial advisor to Quintron.

About Quintron Systems

Quintron Systems, founded in 1970, is a trusted provider of communications technology solutions for aerospace, defense, and critical infrastructure. Based in Santa Maria, California, Quintron is known for its reliable, secure, and innovative communication systems. The company’s products and services are used by government agencies, military organizations, and commercial clients worldwide. To learn more about Quintron, please visit: www.quintron.com.

About Special Aerospace Services

Special Aerospace Services is an industry leader in spaceflight engineering and hardware with facilities in California, Colorado and Alabama. Special Aerospace Services offers a full-cycle solution portfolio that includes tactical engineering support in Spaceflight Safety™, propulsion, avionics, systems, safety, and launch site integration, as well as rapid prototyping, manufacturing, and procurement of mission-critical aerospace hardware systems for clients such as NASA, the U.S. Department of Defense, and the commercial spaceflight sector. Special Aerospace Services’ team is committed to furthering humankind’s dreams and endeavors in space and keep the dream of space exploration alive for future generations. To learn more about SAS, please visit: www.specialaerospaceservices.com.

About Godspeed Capital Partners

Godspeed Capital is a lower middle-market Defense & Government services, solutions, and technology focused private equity firm investing alongside forward-thinking management teams that seek an experienced and innovative investment partner with unique sector expertise, operational insight, and flexible capital for growth. While a typical investment will involve companies generating approximately $3 m to $30 m of EBITDA, Godspeed Capital has significant support to complete larger transactions through strategic co-invest relationships. The firm focuses on control buyouts, buy-and-builds, corporate carve-outs, and special situations. For more information, please visit the Godspeed Capital website at www.godspeedcm.com. (Source: BUSINESS WIRE)

 

06 May 24. SRT Marine pushes out year-end as it bids for new system contracts. Maritime surveillance and navigation technology specialist SRT Marine Systems announced a change to its financial reporting dates on Friday, in a bid to safeguard its ability to bid for pending new system contracts.

The AIM-traded firm said it had resolved to extend its financial year-end from 31 March to 30 June, adding three months to the current financial year.

It said it planned to publish audited final results for the extended period by October, with subsequent financial reports to follow a revised schedule, with unaudited interim results for the six months ended 31 December due by 31 March, and audited final results for the 12 months ended 30 June by 31 December each calendar year.

The board said the decision to extend the financial year-end stemmed from the need to meet minimum financial ratio criteria in a specific jurisdiction to bid and contract for new projects.

Concerns arose due to the potential delay in completing existing system project deliveries, expected in March, primarily attributed to government processes and paperwork, compounded by the annual Ramadan and EID periods.

Such delays could impact financial ratios, which SRT said jeopardised its ability to pursue new projects, prompting the board to mitigate the risk.

In December, SRT successfully completed a £10.5m equity cash raise, bolstering its balance sheet and ensuring financial stability.

The company said it was awaiting government agencies in three countries to finalise processes for executing initial revenue milestones on projects valued at $220m.

Despite the paperwork completion concerns, SRT reported significant progress in all system project opportunities over the past three months, with increasing visibility and confidence in timelines.

Notably, the firm released and was implementing an enhanced version of its ‘GeoVS’ maritime surveillance system, featuring improvements in functionality and performance, including faster data processing and enhanced analytics capabilities.

On the operational front, SRT reported a solid performance in its transceivers business, maintaining gross profit margins following the normalisation of supply chain and market conditions post-Covid.

The DAS subdivision showed promise with a growing pipeline of opportunities, while the NEXUS marine voice and communications system was progressing through testing and validation stages, with initial field trials underway.

Looking ahead, SRT maintained its revenue expectations for the extended 15-month period ending 30 June, consistent with previous projections for the 12 months ending 31 March.

“Our recent £10.5m fundraise has placed us in a strong cash position where we can confidently make these decisions and maximise our market opportunities,” said chief executive officer Simon Tucker.

“The decision to move our financial year end date mitigates the risk that a few weeks delay on paperwork could exclude us from some significant new contract opportunities.” (Source: Sharecast)

 

06 May 24. Cuashub.com said today that Axon (Nasdaq: AXON), the global public safety technology leader, announced today it has entered into a definitive agreement to acquire Dedrone, a global leader in airspace security. Axon’s mission to Protect Life finds a powerful ally in Dedrone, whose innovative technologies provide immense value to public safety and national security entities worldwide by protecting against increasing drone threats and advancing the use of Drones as First Responders (DFR). Ultimately, upon completion of the acquisition, Dedrone will strengthen Axon’s ability to help customers safeguard their communities, improve response to critical incidents, and protect even more lives in more places.

“By combining Axon’s 30-year legacy of innovation with Dedrone’s cutting-edge airspace security solutions, we aim to revolutionize public safety once again,” said Axon Founder and CEO Rick Smith. “Together, we will accelerate our efforts in creating a more advanced end-to-end drone solution that enables the good drones to fly and helps ensure the bad ones don’t.” Dedrone Chief Executive Officer Aaditya Devarakonda said: “Dedrone’s growing impact across industries such as federal governments, utilities and critical infrastructure, event venues, airports, correctional facilities, and other enterprises, coupled with Axon’s powerful ecosystem of connected devices and software, will put us at the forefront of ensuring not only the safety of our communities but also the security of nations around the world.”

The transaction is subject to customary closing conditions and is expected to close in the second half of 2024. The terms of the transaction were not disclosed. Axon was advised by Sullivan & Cromwell LLP and Morgan, Lewis & Bockius LLP, and Dedrone was advised by Tidal Partners and Wilmer Cutler Pickering Hale and Dorr LLP in connection with the transaction.

https://cuashub.com/en/content/axon-agrees-to-acquire-dedrone/?_hsenc=p2ANqtz–00RycuD9kjpMjSdiKgJIeqPAhq4zZdWxh6iBAPEf2PHGNVb-qwon2rLtIQq_fNRoH4POpbyK0-AqlrFnxL6LlRVua8mW2Brwdnw1lLDdoLSiG_nU&_hsmi=305957767#utm_campaign=C-UAS%20Hub%20General&utm_medium=email&utm_content=305957767&utm_source=hs_email (Source: https://cuashub.com/)

 

07 May 24. HENSOLDT continues positive business development in the first quarter of 2024 and benefits from strong order intake.

• Order intake grows by 91.8% year over year to EUR 665 m with major orders in the Sensors segment
• Revenue on track at EUR 329m
• Order backlog at record high of EUR 5,879m (+6.3%)
• Adjusted EBITDA margin increases significantly year over year to 10.2% (+ 1.2 pp)
• Acquisition of ESG successfully completed
• Guidance for the 2024 financial year confirmed in all relevant key performance indicators

The HENSOLDT Group (“HENSOLDT”) started the 2024 financial year with a positive business development. In the first quarter of 2024, the company almost doubled its order intake to EUR 665m compared to the same period of the previous year (Q1 2023: EUR 347m). HENSOLDT particularly benefited from major orders in the Sensors segment, such as the German air defence system for close- and short-range protection (LVS NNbS) ordered in January and additional orders for the TRML-4D radar. As a result, the order backlog reached a record high of EUR 5,879 m in the first three months of 2024 (+6.3% compared to the year end of 2023).

Revenue was slightly below the previous year’s level at EUR 329m (Q1 2023: EUR 338m). In addition to an exceptionally strong comparative quarter in the previous year, this was due to a decrease of the pass-through business (revenue with a low value-added share). At the same time, HENSOLDT further improved its profitability and increased the adjusted EBITDA by 10.7% year over year to EUR 33m (Q1 2023: EUR 30m). With a positive project mix and more efficient cost management, the adjusted EBITDA margin increased from 9.0% to 10.2%.

Adjusted free cash flow improved from EUR -137m to EUR -81m year over year, mainly driven by higher cash inflows from customer contracts. In addition, cash flow reflected investments in working capital.

Oliver Dörre took over management responsibility as CEO of the HENSOLDT Group with effect from 1 April 2024. With this step, the company fully focuses on operational excellence and seamlessly continues the successful business performance of recent years. Commenting on the presentation of the financial results, Oliver Dörre, CEO of the HENSOLDT Group, said: “The global security environment has become even more complex and volatile in recent months. This has further intensified the demands on modern security and defence solutions and confirmed the need for our innovative sensor solutions, for example in the field of air defence. If we want to stand up to an aggressor like Russia, we need both when it comes to weapon systems: quality and quantity. Our Operational Excellence program is aimed at both: we are continuously expanding our production capabilities and investing in digital product innovation and innovative solutions. Iran’s massive attack on Israel and the horrific images from Ukraine show that air strikes by drones and missiles are part of the spectrum of modern warfare. That is why the European Skyshield Initiative (ESSI) – to which we are contributing our TRML-4D mid-range radar – is so important.”

Christian Ladurner, CFO of the HENSOLDT Group, says: “In the first quarter of 2024, HENSOLDT successfully continued its growth trajectory. With an order backlog at a record high, we are ideally positioned and have very good visibility on our business development. We were able to further increase our profitability in the first three months of 2024. Thereby, we are benefiting from improved operational processes and efficient cost management. Starting in the second quarter, we also expect the first positive effects from the consolidation of the successful ESG acquisition. This will be an important driver for our revenues and order development. We are therefore optimistic for the fiscal year 2024 and confirm our outlook for all relevant key performance indicators.”

Continued strong performance of core business

HENSOLDT’s core business in the Sensors segment once again improved significantly year over year with major orders and a strong order intake in the first three months of 2024. Order intake and order backlog increased by 190.5% and 7.5% respectively compared to the previous year. Almost all divisions benefited from the German air defence system for close- and short-range protection (LVS NNbS) ordered by Bundeswehr.

HENSOLDT also benefited from the LVS NNbS project in the Optronics segment and further increased its order backlog (+3.2% compared to the year end 2023).

The increase in the order backlog to EUR 880m was primarily achieved in the Radar & Naval Solutions and Optronics & Land Solutions divisions.

Acquisition of ESG successfully completed

In the first quarter of 2024, HENSOLDT continued the acquisition process with ESG Elektroniksystem- und Logistik-GmbH and successfully completed it with effect from 2 April 2024. A comprehensive post-merger integration project was launched immediately after the closing and, in addition to the operational integration of ESG into HENSOLDT, will also systematically drive the planned revenue and cost synergies. The acquisition adds strong design and system integration capabilities to HENSOLDT’s product and solutions business and creates a national champion in defence electronics. Positive effects of the acquisition on HENSOLDT’s order and revenue development are expected as of beginning of the second quarter.

 

06 May 24. inTEST Reports $29.8m in Revenue for First Quarter 2024.

• Sequentially first quarter revenue increased 7%, or $1.9m, including $1.4m in revenue from the Alfamation acquisition
• Compared with the prior-year period, overall sales declined while the acquisition and growth from diversified markets, specifically industrial and defense/aerospace, helped to offset the weakness in semiconductor sales
• Earnings per diluted share was $0.05 while adjusted earnings per diluted share1 was $0.10
• Generated $2.1m in cash from operations in the quarter; cash at March 31, 2024 was $27.3m and reflects the $19m in cash used for the Alfamation acquisition
• Adjusting full year revenue expectation to $140m to $150m which represents 18% growth over 2023 at the mid-point of the range

inTEST Corporation (NYSE American: INTT), a global supplier of innovative test and process technology solutions for use in manufacturing and testing in key target markets which include automotive/EV, defense/aerospace, industrial, life sciences, security, and semiconductor (“semi”), today announced financial results for the quarter ended March 31, 2024. Results include Alfamation S.p.A. (“acquisition” or “Alfamation”) from the date of acquisition which was March 12, 2024.

Nick Grant, President and CEO, commented, “Our first quarter results continue to reflect the tempered semiconductor market conditions we saw exiting 2023. While down year-over-year, sequentially sales were up although margins were impacted by the timing of the acquisition, the mix in sales, and higher professional fees. On the order front and outlook, we saw a sudden shift in order trends as a number of opportunities which we had expected late in the quarter were either delayed or reduced in size. It appears that capacity build in the semiconductor industry in conjunction with slower demand has stalled some customers’ investments in new capital projects, specifically in front-end semi. While our pipeline across all markets remains healthy, the rate of opportunity conversion to orders over the last few quarters has been slowing. Given the unexpected lower rate of orders in the quarter we are moderating our full year outlook.”

He added, “Nonetheless, we have a record backlog of $55.5 m that measurably benefited from the $22.8m in backlog from Alfamation. This backlog provides us further confidence in our expectations for the acquisition. Importantly, we remain highly encouraged with our long-term outlook. We are continuing to build inTEST into a global leader of test and process technologies by introducing new products, innovating to create solutions for our customers’ toughest challenges and being application experts in the industries we serve. We expect key target markets to continue to benefit from ongoing macro tailwinds such as reshoring/near shoring, automation, electronification and digitization, productivity enhancements and rebuilding of domestic defense capabilities. Our acquisition pipeline also remains active. Although near term visibility is limited, we expect to continue to deliver growth in 2024 aided by the acquisition of Alfamation.”

1 Adjusted earnings per diluted share is a non-GAAP financial measure. Further information can be found under “Non-GAAP Financial Measures.” See also the reconciliations of GAAP financial measures to non-GAAP financial measures that accompany this press release.

First Quarter 2024 Review (see revenue by market and by segments in accompanying tables)

Compared with the prior-year period, first quarter revenue was down $2.1m and was impacted by $2.7m lower sales to the semi market. This was partially offset by the $1.4m contribution in revenue from the acquisition, primarily in automotive/EV, as well as an increase of $1.1m to the industrial market, and a 14%, or $0.4m, increase in sales to the defense/aerospace market. Sequentially, revenue increased by $1.9m as a result of semi revenue growing 39%, defense/aerospace sales increasing 34% and the acquisition offsetting declines in auto/EV.

Gross margin was 43.8% in the first quarter, a 340-basis point contraction compared with the prior-year period primarily due to the timing of the acquisition, volume and product mix. Due to the stub period of ownership and timing of revenue and costs, the acquisition was dilutive to gross margin by 100 basis points. Operating expenses increased primarily because of $350,000 of incremental expenses gained from the acquisition, $650,000 of incremental corporate development expenses and approximately $200,000 in higher professional fees associated with reporting of 2023 financials and Sarbanes-Oxley Act compliance. These costs were somewhat offset by lower selling costs and expense management.

With the benefit of other income in the quarter of $0.4m, net earnings were $0.7m, or $0.05 per diluted share. Adjusted net earnings (Non-GAAP) 2 were $1.2m, or $0.10 adjusted EPS (Non-GAAP) 2.

Balance Sheet and Cash Flow Review

Cash and cash equivalents (including restricted cash) at the end of the first quarter of 2024 were $27.3m, down from $45.3m at the end of December 31, 2023 as a result of approximately $19m in cash used for the acquisition. During the quarter, the Company generated $2.1m in cash from operations. Capital expenditures were $0.3m in the first quarter of 2024, similar to the prior-year period.

At quarter end, total debt was $20.4m which includes approximately $9.4m assumed with the acquisition. The Company repaid approximately $1m in debt in the quarter. At March 31, 2024, the Company had $30 m available under its delayed draw term loan facility and no borrowings under the $10 m revolving credit facility. On May 2, 2024, the Company extended the maturity of its delayed draw term loan and revolving credit facility to May 2, 2031. In addition, the allowed window to draw on the term loan was extended to May 2, 2026.

2 Adjusted net earnings, adjusted EPS, adjusted EBITDA, and adjusted EBITDA margin are non-GAAP financial measures. Further information can be found under “Non-GAAP Financial Measures.” See also the reconciliations of GAAP financial measures to non-GAAP financial measures that accompany this press release

First quarter orders of $22.8m, including $1.8m in orders related to the acquisition, declined 26% over the prior-year period. The decline reflects an $8.1m, or 44%, decline in orders from the semi market. Life sciences and industrial markets declined $2.3m combined due to the timing of orders received. Approximately $5m in expected orders were delayed or reduced by customers at the end of the quarter.

Sequentially, orders declined 17.2%. Growth in demand in automotive/EV and back-end semi partially offset sequential declines in front-end semi, life sciences and other markets. The sequential decline in orders for the defense/aerospace and industrial markets were largely the result of tough comparators.

Backlog at March 31, 2024, was $55.5m and included $22.8m of backlog associated with the acquisition. Approximately 45% of the backlog is expected to ship beyond the second quarter of 2024.

Second Quarter and Full Year 2024 Outlook

Revenue for the second quarter of 2024 is expected to be in the range of $34m to $36m with gross margin in the range of approximately 44% to 45%.

Second quarter 2024 operating expenses, including amortization, are expected to run at approximately $14.5m to $15m, and reflect annual merit increases. Intangible asset amortization is expected to be approximately $1.5m pre-tax, or approximately $1.2m after tax. Interest expense is expected to be approximately $195,000 for the quarter.

Based on weighted average shares of 12.3m, second quarter 2024 EPS is expected to be in the range of $0.00 to $0.06, while adjusted EPS (Non-GAAP) (1) is expected to be in the range of $0.10 to $0.16. (Source: BUSINESS WIRE)

 

07 May 24. Defence spending drives Solid State to record results.

Ongoing robust demand from military and security markets is proving a boon for this value-added electronics group

• $5.1m Internet of Things (IoT) contract
• Guidance for record annual results

Redditch-based value-added electronics group Solid State (SOLI: 1,390p) is set to report record annual results in early July and is continuing to win significant new orders, too.

Analysts at Cavendish predict pre-tax profits will increase by 38 per cent to £15mn on 30 per cent higher revenue of £164m in the 12 months to 31 March 2024. On this basis, expect 25 per cent growth in earnings per share (EPS) to 101p, or 17 per cent higher than analysts were forecasting at the interim results (‘Solid State continues to profit from the defence spending boom’, 5 December 2023).

The outperformance reflects the earlier-than-expected shipment of communication equipment to a Nato defence customer. Strong demand from both the defence and security segments has been key to the exceptionally strong showing from the group’s systems business, which is expected to increase annual revenue by 80 per cent to more than £100m.

However, other areas of the business are performing well, too, as highlighted by this week’s contract win. Solid State is supplying an IoT technology solution to a US customer that enables smart billing, intelligent stock control and management through an industrial router and cloud-based services for smart vending machines. The contract demonstrates how the group is internationalising sales by exporting its UK expertise into the US market.

Moreover, having adjusted forecasts for the new financial year to reflect the early delivery of the Nato order, analysts at Cavendish see their pre-tax profit estimate of £10mn as increasingly well underwritten and offering potential for upgrades as the year progresses. I agree and see scope for earnings-accretive acquisitions, too.

Trading on an enterprise valuation to operating profit multiple of 9.7 for 2024 and 13.9 for 2025, I maintain the 1,700p target I set when I first suggested buying the shares at 1,300p (Alpha Research: An overlooked share to benefit from rising defence spending’, 20 July 2023). Buy. (Source: Investors Chronicle)

 

07 May 24. Airbus has finalised the acquisition of U.S.-based Aerovel and its unmanned aerial system (UAS), Flexrotor, in a move to strengthen its portfolio of tactical unmanned solutions. Flexrotor is a small tactical unmanned aerial system designed for intelligence, surveillance, target acquisition and reconnaissance (ISTAR) missions at sea and over land.

“We see more and more armed forces and parapublic agencies around the world looking to investigate how unmanned aerial systems can strengthen their intelligence and surveillance capabilities. The Flexrotor, as a vertical takeoff and landing UAS, fits into our strategy to expand our UAS offerings. Together with the VSR700, we will continue to develop manned-unmanned teaming to offer our customers the enhanced and expanded mission capabilities that they require to monitor and safeguard their communities and critical infrastructure, while preserving essential assets such as helicopters,” said Mathilde Royer, Head of Strategy and Sustainability at Airbus Helicopters.

The Flexrotor, a modern Vertical Takeoff and Landing (VTOL) Unmanned Aircraft with a maximum launch weight of 25 kg (55 lbs), has been designed for ISTAR missions for more than 12-14 hours in a typical operational configuration. It can integrate different types of payloads including an electro-optical system and advanced sensors to suit customers’ unique mission needs. With the ability to autonomously launch and recover from either land or sea requiring only a 3.7 by 3.7 m (12 by 12 ft.) area, the Flexrotor is ideal for expeditionary missions requiring minimal footprint. Through the support of the US Department of Defense (DoD), and contracted deployment in a variety of maritime security exercises, the Flexrotor is a mission-proven, force multiplier for operations in harsh, high-threat, GPS-denied environments. The Flexrotor is also being operated for parapublic missions such as forest fire surveillance (providing firefighters with critical images day or night) and can address other demanding mission needs, including ice navigation (helping guide naval vessels through ice in the Arctic ocean), law enforcement, and border patrol.

Aerovel currently employs more than 30 people and presents a significant growth trajectory. It will continue to design and manufacture the Flexrotor in Bingen, Washington in an existing and mature UAS ecosystem.

 

06 May 24. BWX Technologies Reports First Quarter 2024 Results.

• 1Q24 revenues of $604.0m
• 1Q24 net income of $68.5m, adjusted EBITDA(1) of $115.2m
• 1Q24 diluted GAAP EPS of $0.75, non-GAAP(1) EPS of $0.76
• Announced expansion of Cambridge manufacturing plant; enhancing capabilities to serve the global CANDU and Small Modular Reactor markets
• Reaffirms 2024 non-GAAP EPS(1) guidance of $3.05-$3.20

BWX Technologies, Inc. (NYSE: BWXT) (“BWXT”, “we”, “us” or the “Company”) reported first quarter 2024 results. A reconciliation of non-GAAP results are detailed in Exhibit 1.

“We started 2024 with solid operating results in each of our business segments, both financially and strategically,” said Rex. D. Geveden, president and chief executive officer. “We continued to see good organic revenue growth across our business in the first quarter with profitability tracking well given the significant onboarding of new team members and the programs we are executing to address our customers’ expanding missions.”

“BWXT’s strong employee base, technical expertise and unmatched infrastructure position us well to benefit from the increased use of nuclear technologies across global security, clean energy and medical markets,” said Geveden. “Our recent announcement to expand capacity at our Cambridge manufacturing facility not only enhances our position in the global CANDU large reactor and advanced small reactor markets, but also highlights the robust growth opportunities we see in commercial nuclear power as our customers seek to extend the life of existing power generation capacity and add new capacity with clean baseload power.”

“We are reaffirming our 2024 financial guidance and remain focused on operational excellence, innovation and providing our customers with nuclear technologies as we drive toward achieving the medium-term financial targets we provided at our recent Investor Day,” continued Geveden.

Revenues

First quarter revenue increased in both operating segments. The Government Operations increase was driven by higher naval nuclear component production, microreactors and special materials processing, which was partially offset by lower long-lead material procurement. The Commercial Operations increase was driven by higher revenue associated with commercial nuclear field services as well as higher medical sales, which was partially offset by lower fuel handling and components volume.

Operating Income and Adjusted EBITDA(1)

First quarter operating income increased, driven by higher operating income in Commercial Operations and lower corporate expense that was partially offset by lower operating income in Government Operations. The Government Operations decrease was due to the increase in staffing levels and associated training and related inefficiencies, as well as mix due to higher microreactors revenue. The Commercial Operations increase was due to improved margin in medical, but partially offset by a less favorable product mix in commercial nuclear. Additionally, corporate expense was lower, mainly due to the timing of healthcare related costs.

First quarter adjusted EBITDA(1) increased for the reasons noted above.

EPS

First quarter GAAP EPS increased due to higher operating income, higher other income, lower interest expense and a lower effective tax rate compared to first quarter 2023. Non-GAAP EPS(1) increased driven by the items noted above.

Cash Flows

First quarter operating cash flow increased due to higher net income and improved working capital management. Capital expenditures were slightly higher due to capital expenditures related to the timing of select growth investments.

Dividend

BWXT paid $22.4m, or $0.24 per common share, to shareholders in the first quarter of 2024. On May 2, 2024, the BWXT Board of Directors declared a quarterly cash dividend of $0.24 per common share payable on June 6, 2024, to shareholders of record on May 17, 2024. (Source: BUSINESS WIRE)

 

06 May 24. Axon raises full-year revenue forecast on strong demand for its software products. Axon Enterprise (AXON.O), raised its full-year core profit and revenue forecast Monday, banking on strong demand for its software products and recently launched TASER 10 policing device. The company now expects full-year 2024 revenue to be between $1.94bn and $1.99bn, compared with its previous forecast of $1.88bn to $1.94bn. Axon is the leading maker of police body cameras in the U.S. and supplies drones to law enforcement agencies in North America, Europe and Australia. It expects adjusted core profit in the range of $430m to $445m, up from its previous forecast range of $410m to $430m. Axon also announced that it would acquire drone defense firm Dedrone. However, it did not disclose a deal value. The transaction would increase Axon’s total addressable market size by $14bn, is expected to close in the second half of 2024. The company reported revenue of $461m in the first quarter, up 34% year-on-year and above analysts’ estimates of $441.6m. (Source: Reuters)

 

06 May 24. Wozniak’s space firm, Privateer, buys Orbital Insight, raises $56.5m. Apple (AAPL.O), cofounder Steve Wozniak’s space data startup, Privateer, has raised $56.5m and also acquired the analytics firm Orbital Insight, a merger that will add mapping and intelligence services to Privateer’s space data offerings, Privateer’s CEO told Reuters.

Privateer, founded in 2021 to help satellite operators navigate in Earth’s increasingly crowded orbit, closed its Series A funding round in April, led by space-focused venture capital firm Aero X Ventures with other investors including Luxe Capital, Boca, Starburst, and the Winklevoss twins. The news is expected to be announced later on Monday.

Orbital’s TerraScope Earth observation platform, designed to be a vast search engine based on recently captured satellite imagery from other companies, will combine with Privateer’s satellite-tracking software.

The new funding allowed Privateer to close a deal to buy Palo Alto-based Orbital Insight on April 14, Privateer’s CEO, Alex Fielding, said. Orbital, which fuses various sources of data such as cell phone location and satellite imagery as its intelligence offerings to customers, had been backed by Sequoia and Google Ventures.

Fielding declined to disclose the value of the combined entity or the price of Orbital Insight.

Privateer’s acquisition will expand its offerings after revenue prospects in the space situational awareness (SSA) market were limited, Fielding said. SSA is a nascent corner of the space industry akin to air traffic control, but for satellites in space. Such services are deemed crucial for satellite navigation given there are no international norms to control a soaring amount of space traffic.

“It’s not really a market, it’s actually a bunch of companies that have been providing a stopgap for the fact that the government hasn’t provided a service for space traffic management,” Fielding said in an interview last week.

Privateer is offering its SSA services to satellite imagery companies to help them task targets on Earth and maneuver their satellites around space junk in exchange for the hordes of satellite imagery ordered by their customers that could make for a near real-time mapping and intelligence service.

That imagery will funnel into a new platform that Fielding expects to release publicly in the next six months or so.

“You take the image once, you should be able to sell it a m times, for a fraction of the acquisition price,” Fielding said, referring to the satellite imagery companies with whom Privateer is working to integrate their data. (Source: Reuters)

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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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