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07 Nov 24. TransDigm Group Reports Fiscal 2024 Fourth Quarter and Year-End Results

TransDigm Group Incorporated (NYSE: TDG), a leading global designer, producer and supplier of highly engineered aircraft components, today reported results for the fourth quarter ended September 30, 2024.

Fourth quarter highlights include:

Net sales of $2,185m, up 18% from $1,852m in the prior year’s quarter;
Net income of $468m, up 13% from the prior year’s quarter;
Earnings per share of $5.80;
EBITDA As Defined of $1,149m, up 19% from $963m in the prior year’s quarter;
EBITDA As Defined margin of 52.6%; and
Adjusted earnings per share of $9.83, up 22% from $8.03 in the prior year’s quarter.

Fiscal 2024 highlights include:

Net sales of $7,940m, up 21% from $6,585m in the prior fiscal year;
Net income of $1,715m, up 32% from the prior fiscal year;
Earnings per share of $25.62, up 16% from the prior fiscal year;
EBITDA As Defined of $4,173m, up 23% from $3,395m in the prior fiscal year;
EBITDA As Defined margin of 52.6%; and
Adjusted earnings per share of $33.99, up 32% from $25.84 in the prior fiscal year.

Quarter-to-Date Results

Net sales for the quarter increased 18.0%, or $333m, to $2,185m from $1,852m in the comparable quarter a year ago. Organic sales growth as a percentage of net sales was 12.2%.

Net income for the quarter increased $54m, or 13.0%, to $468m from $414m in the comparable quarter a year ago. The increase in net income primarily reflects the increase in net sales described above and the application of our value-driven operating strategy. The increase was partially offset by higher interest expense, non-cash stock and deferred compensation expense, and acquisition transaction and integration-related expenses.

GAAP earnings per share were reduced in the quarter by $2.27 per share as a result of dividend equivalent payments accrued in the fourth quarter related to the $75.00 per share dividend declared on September 19, 2024 and paid on October 18, 2024. No dividend equivalent payments were made during the fourth quarter of fiscal 2023.

Adjusted net income for the quarter increased 23.9% to $570 m, or $9.83 per share, from $460 m, or $8.03 per share, in the comparable quarter a year ago.

EBITDA for the quarter increased 14.3% to $1,041 m from $911 m for the comparable quarter a year ago. EBITDA As Defined for the quarter increased 19.3% to $1,149 m compared with $963 m in the comparable quarter a year ago. EBITDA As Defined as a percentage of net sales for the quarter was 52.6% compared with 52.0% in the comparable quarter a year ago.

Acquisition Activity

As previously reported on July 31, 2024, TransDigm completed the acquisition of Raptor Scientific. Raptor Scientific is a leading global manufacturer of complex test and measurement solutions primarily serving the aerospace and defense end markets.

Financing Activity

On September 19, 2024, the Company completed the issuance of $3,000 m in new senior secured debt. The new senior secured debt issued included $1,500m in 6.00% senior secured notes maturing January 15, 2033 and $1,500m in Tranche L term loans maturing January 19, 2032. The Tranche L terms loans bear interest at Term Secured Overnight Financing Rate (“SOFR”) plus 2.50%.

Special Dividend Activity

During the quarter, on September 19, 2024, concurrently with the $3,000m issuance of new senior secured debt (described above), the Company’s Board of Directors authorized and declared a special cash dividend of $75.00 on each outstanding share of common stock and cash dividend equivalent payments on eligible vested options outstanding under its stock option plans. Total cash payments, funded by the combination of the $3,000 m in new senior secured debt and existing cash on hand, related to the special dividend and dividend equivalents were approximately $4,348 m. These payments were made on October 18, 2024.

Year-to-Date Results

Fiscal 2024 net sales increased 20.6%, or $1,355m, to $7,940m from $6,585m in fiscal 2023. Organic sales growth as a percentage of net sales for fiscal 2024 was 16.2%.

Fiscal 2024 net income increased $416m, or 32.0%, to $1,715 m from $1,299m in fiscal 2023. The increase in net income primarily reflects the increase in net sales described above and the application of our value-driven operating strategy. The increase was partially offset by higher interest expense, income tax expense, non-cash stock and deferred compensation expense, and acquisition transaction and integration-related expenses.

GAAP earnings per share were reduced in fiscal 2024 and 2023 by $4.02 per share and $0.67 per share, respectively, as a result of dividend equivalent payments accrued or made during each year. As a reminder, GAAP earnings per share are reduced when TransDigm makes dividend equivalent payments pursuant to its stock option plans. These dividend equivalent payments are made during TransDigm’s first fiscal quarter each year and also upon payment of any special dividends.

Fiscal 2024 adjusted net income increased 33.1% to $1,966m, or $33.99 per share, from $1,477m, or $25.84 per share, in fiscal 2023.

Fiscal 2024 EBITDA increased 21.1% to $3,813 m from $3,148m in fiscal 2023. EBITDA As Defined for fiscal 2024 increased 22.9% to $4,173 m compared with $3,395m in fiscal 2023. EBITDA As Defined as a percentage of net sales for fiscal 2024 was 52.6% compared with 51.6% in fiscal 2023.

“I am very pleased with our team’s performance and the overall operating results for the fourth quarter and full year of fiscal 2024,” stated Kevin Stein, TransDigm Group’s President and Chief Executive Officer. “The strong fourth quarter performance resulted in surpassing the high end of our most recently issued fiscal 2024 revenue guidance and EBITDA As Defined margin guidance. Our EBITDA As Defined margin for the quarter was 52.6%, up approximately 60 basis points from the comparable prior year period. Excluding the results related to the 2024 acquisitions of SEI Industries, the CPI Electron Device Business and Raptor Scientific, our fourth quarter EBITDA As Defined margin was approximately 53.7%.

During the course of the past six months, we have deployed approximately $6.5bn of capital across three acquisitions – SEI Industries, the CPI Electron Device Business and Raptor Scientific, and a special dividend of $75 per share. The payout of this dividend in October 2024 still leaves us with significant liquidity and financial flexibility to address any likely range of capital requirements or other opportunities. As you know, we are continuously evaluating our capital allocation options and we were pleased to return this capital to our shareholders.

As always, we remain committed to our operating strategy, value drivers and the effective management of our cost structure. We look forward to the opportunity to continue creating value for our shareholders as we move into our fiscal 2025.”

Please see the attached tables for a reconciliation of net income to EBITDA, EBITDA As Defined, and adjusted net income; a reconciliation of net cash provided by operating activities to EBITDA and EBITDA As Defined; and a reconciliation of earnings per share to adjusted earnings per share for the periods discussed in this press release.

Fiscal 2025 Outlook

Mr. Stein stated, “We are issuing full year fiscal 2025 guidance today, which reflects our current expectations for the year. We were very pleased to see the further recovery of our commercial markets in our fiscal 2024, alongside strong growth in the defense market. We expect continued growth in each of our primary end markets – commercial OEM, commercial aftermarket and defense – in our fiscal 2025.” The commercial OEM guidance contains an appropriate level of risk around the expected OEM production build rates for fiscal 2025.

TransDigm now expects fiscal 2025 financial guidance to be as follows:

Net sales are anticipated to be in the range of $8,750m to $8,950 m compared with $7,940m in fiscal 2024, an increase of 11.5% at the midpoint;
Net income is anticipated to be in the range of $1,887m to $1,999 m compared with $1,715m in fiscal 2024, an increase of 13.3% at the midpoint;
Earnings per share is expected to be in the range of $31.47 to $33.39 per share based upon weighted average shares outstanding of 58.4m shares, compared with $25.62 per share in fiscal 2024, which is an increase of 26.6% at the midpoint;
EBITDA As Defined is anticipated to be in the range of $4,615 m to $4,755 m compared with $4,173m in fiscal 2024, an increase of 12.3% at the midpoint (corresponding to an EBITDA As Defined margin guide of approximately 52.9% for fiscal 2025);
Adjusted earnings per share is expected to be in the range of $35.36 to $37.28 per share compared with $33.99 per share in fiscal 2024, an increase of 6.9% at the midpoint; and
Fiscal 2025 outlook is based on the following market growth assumptions:
Commercial OEM revenue growth in the mid single-digit percentage range;
Commercial aftermarket revenue growth in the high single-digit to low double-digit percentage range; and
Defense revenue growth in the high single-digit percentage range.

(Source: PR Newswire)

08 Nov 24. Embraer 2024 Guidance updated: Management believes prior guidance no longer represents evenly balanced opportunities and risks for full-year operations. From an operations point of view, we estimate Commercial Aviation deliveries between 70 and 73 aircraft (down from 72 and 80), and Executive Aviation deliveries between 125 and 135 (unchanged). From a finance point of view, we forecast Revenues in the US$6.0-6.4bn range (unchanged), Adjusted EBIT margin between 9.0% and 10.0% (up from 6.5% and 7.5%), and Adjusted Free Cash Flow of US$300m or higher (up from US$220m or higher).

Fitch Ratings upgraded our credit rating from “BB+” to “BBB-” with a stable outlook in late September. Consequently, both S&P and Fitch currently rate the company Investment Grade (IG). Moody’s rating remains Ba1 (i.e. one-notch below IG) but it recently revised the company’s outlook to positive.
Embraer delivered 59 jets in 3Q24 of which 41 were executive jets (22 light and 19 medium), 16 were commercial jets and 2 multi-mission C-390 Millennium in Defense & Security; +26% versus the 47 aircraft delivered quarter over quarter (qoq) and +37% versus the 43 aircraft delivered year over year (yoy).
Firm order backlog of US$22.7bn in 3Q24 – a new record, at a 9-year high level, more than 25% higher yoy and almost 10% higher qoq. For more information please see our 3Q24 Backlog and Deliveries release.
Revenues totaled US$1,692m in the period; +32% yoy. Highlight for Executive Aviation and Defense & Security revenues +65% yoy growth each.
Adjusted EBIT reached US$297.5m with a 17.6% margin in 3Q24 (US$147.5m and 8.7% ex-Boeing arbitration; US$100.1m and 7.8% in 3Q23).
Adjusted free cash flow w/o Eve was US$241.1 m during the quarter because of higher number of aircraft delivered.

07 Nov 24. nLIGHT, Inc. Announces Third Quarter 2024 Results.

Revenues of $56.1m for the third quarter of 2024

nLIGHT, Inc. (Nasdaq: LASR), a leading provider of high-power semiconductor and fiber lasers used in the industrial, microfabrication, and aerospace and defense markets, today reported financial results for the third quarter of 2024.

“Strong execution across multiple programs in both directed energy and laser sensing resulted in record Aerospace & Defense product revenue during the quarter, and we remain well-positioned for near- and long-term growth in the Aerospace & Defense market.”

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“Driven by record results in Aerospace & Defense, third quarter revenue of $56.1m was above the midpoint of our guidance range and increased 11% compared to the third quarter of 2023,” commented Scott Keeney, nLIGHT’s President & Chief Executive Officer. “Strong execution across multiple programs in both directed energy and laser sensing resulted in record Aerospace & Defense product revenue during the quarter, and we remain well-positioned for near- and long-term growth in the Aerospace & Defense market.”

Mr. Keeney continued, “A strong growth quarter in Microfabrication coupled with higher A&D products revenue enabled us to increase products gross margin to 29%, an improvement of approximately 500 basis points compared to the third quarter of 2023. Our balance sheet remains strong as we ended the quarter with approximately $107m in cash and investments with no debt.”

Revenues of $56.1m for the third quarter of 2024 were up 10.9% compared to $50.6m for the third quarter of 2023. Gross margin was 22.4% for the third quarter of 2024 compared to 19.6% for the third quarter of 2023. GAAP net loss for the third quarter of 2024 was $10.3m, or $0.21 per diluted share, compared to net loss of $11.9m, or $0.26 per diluted share, for the third quarter of 2023. Non-GAAP net loss for the third quarter of 2024 was $3.7m, or $0.08 per diluted share, compared to non-GAAP net loss of $4.9m, or $0.10 per diluted share, for the third quarter of 2023. Reconciliations of the non-GAAP metrics presented here to the most directly comparable GAAP metric have been provided in the tables included at the end of this release.

Outlook

For the fourth quarter of 2024, nLIGHT expects revenues to be in the range of $49m to $54m. The midpoint of $51.5m includes Laser Products revenue of approximately $36.5m and Advanced Development revenue of approximately $15m. nLIGHT expects overall gross margin to be in the range of 17% to 21%, with Laser Products gross margin in the range of 21% to 25% and Advanced Development gross margin of approximately 8%. nLIGHT expects Adjusted EBITDA to be in the range of ($5)m to ($2)m.

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

07 Nov 24. MACOM Reports Fiscal Fourth Quarter and Fiscal Year 2024 Financial Results.

MACOM Technology Solutions Holdings, Inc. (“MACOM”) (Nasdaq: MTSI), a leading supplier of semiconductor products, today announced its financial results for its fiscal fourth quarter and fiscal year ended September 27, 2024.

“Our team continues to identify opportunities to expand our customer base and gain share with our leading products and technologies”

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Fourth Quarter Fiscal Year 2024 GAAP Results

Revenue was $200.7m, an increase of 33.5%, compared to $150.4 m in the previous year fiscal fourth quarter and an increase of 5.4% compared to $190.5m in the prior fiscal quarter;
Gross margin was 54.7%, compared to 57.6% in the previous year fiscal fourth quarter and 53.2% in the prior fiscal quarter;
Income from operations was $27.5m, or 13.7% of revenue, compared to income from operations of $15.6m, or 10.4% of revenue, in the previous year fiscal fourth quarter and income from operations of $19.7m, or 10.4% of revenue, in the prior fiscal quarter; and
Net income was $29.4m, or $0.39 per diluted share, compared to net income of $24.5m, or $0.34 per diluted share, in the previous year fiscal fourth quarter and net income of $19.9m, or $0.27 per diluted share, in the prior fiscal quarter.

Fourth Quarter Fiscal Year 2024 Adjusted Non-GAAP Results

Adjusted gross margin was 58.1%, compared to 60.1% in the previous year fiscal fourth quarter and 57.5% in the prior fiscal quarter;
Adjusted income from operations was $50.7m, or 25.2% of revenue, compared to adjusted income from operations of $37.2m, or 24.7% of revenue, in the previous year fiscal fourth quarter and adjusted income from operations of $45.6m, or 24.0% of revenue, in the prior fiscal quarter; and
Adjusted net income was $54.2m, or $0.73 per diluted share, compared to adjusted net income of $40.1m, or $0.56 per diluted share, in the previous year fiscal fourth quarter and adjusted net income of $48.9m, or $0.66 per diluted share, in the prior fiscal quarter.

Fiscal Year 2024 GAAP Results

Revenue was $729.6m, an increase of 12.5%, compared to $648.4m in fiscal year 2023;
Gross margin was 54.0%, compared to 59.5% in fiscal year 2023;
Income from operations was $73.7 m, compared to $107.4 m in fiscal year 2023; and
Net income was $76.9m, or $1.04 per diluted share, compared to a net income of $91.6m, or $1.28 income per diluted share in fiscal year 2023.

Fiscal Year 2024 Adjusted Non-GAAP Results

Adjusted gross margin was 57.9%, compared to 61.3% in fiscal year 2023;
Adjusted income from operations was $175.0m, or 24.0% of revenue, compared to $189.6m, or 29.2% of revenue, in fiscal year 2023; and
Adjusted net income was $188.2m, or $2.56 per diluted share, compared to adjusted net income of $193.3m, or $2.70 per diluted share in fiscal year 2023.

Management Commentary

“Our team continues to identify opportunities to expand our customer base and gain share with our leading products and technologies,” said Stephen G. Daly, President and Chief Executive Officer.

Business Outlook

For the fiscal first quarter ending January 3, 2025, MACOM expects revenue to be in the range of $212m to $218m. Adjusted gross margin is expected to be between 57% and 59%, and adjusted earnings per diluted share is expected to be between $0.75 and $0.81 utilizing an anticipated non-GAAP income tax rate of 3% and 75.0m fully diluted shares outstanding. (Source: BUSINESS WIRE)

07 Nov 24. BlackSky Reports Third Quarter 2024 Results.

Company Receives New Awards Valued up to $780m

YTD Revenue Growth of 22%; Company Reaffirms Full Year 2024 Guidance

First Gen-3 Satellite Completing Final Pre-Ship Testing

BlackSky Technology Inc. (“BlackSky” or the “Company”) (NYSE: BKSY) announced results for the third quarter ended September 30, 2024.

“We delivered a strong quarter of multi-year contract bookings valued up to $780m, continuing to demonstrate growing demand for our high-frequency monitoring and AI-enabled analytic services”

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Third Quarter Financial Highlights:

Revenue of $22.5m, up 6% from the prior year quarter
Imagery & software analytical services revenue grew 13% over the prior year quarter
Imagery & software analytical services cost of sales(1), as a percent of revenue, improved to 21% from 23% in the prior year quarter

“We delivered a strong quarter of multi-year contract bookings valued up to $780m, continuing to demonstrate growing demand for our high-frequency monitoring and AI-enabled analytic services,” said Brian E. O’Toole, BlackSky CEO. “We successfully raised over $45m, which has strengthened our balance sheet and provides the capital, which we believe will fully fund our baseline Gen-3 constellation plan. We are excited to be in the final phases of pre-ship testing of our first Gen-3 satellite as we ready for launch. Looking ahead, we expect to start a regular deployment cadence of Gen-3 satellites in 2025, which will start to unlock our next phase of growth delivering transformative space-based intelligence solutions to customers around the world.”

Recent Highlights

Won a multi-year contract valued up to $290m with the National Geospatial-Intelligence Agency to monitor global economic activity and military capability
Awarded a multi-year contract with NASA valued up to $476m to deliver time-diverse, rapid-revisit satellite imagery to support Earth and applied science research
Signed a $6m contract expansion with an existing international defense sector customer to extend access to BlackSky’s Gen-2 satellite imagery services
Expanded product offering to provide non-Earth imaging services and captured multiple seven-figure contracts in support of growing space domain awareness missions worldwide
Awarded a U.S. Navy research contract to explore applications for advanced optical intersatellite link terminals to provide real-time access to imagery during time-sensitive military operations worldwide
Successfully raised over $45m which is expected to fully fund the Company’s baseline Gen-3 constellation
First Gen-3 satellite in final testing phase and expected to ship to launch site in the next few weeks with a launch window anticipated to open three to four weeks after shipment
BlackSky wins 2024 Novaspace, formerly Euroconsult, Leading Earth Observation Business Award at World Space Business Week in Paris, an event that recognizes companies shaping the future of the global space sector

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

Financial Results

Revenues

Total revenue for the third quarter of 2024 was $22.5m, up $1.3m, or 6%, from the third quarter of 2023. Imagery and software analytical services revenue was $17.3m in the third 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 $5.3m in the third quarter of 2024, compared to $6.0m in the prior year period. 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(

Total cost of sales as a percentage of revenue improved to 29% for the third quarter of 2024, compared to 32% in the third quarter of 2023. Imagery and software analytical service costs as a percentage of revenue improved to 21% in the third quarter of 2024, compared to 23% in the third quarter of 2023, primarily driven by greater volumes of revenue that inherently have a low fixed-cost structure as a percentage of revenue.

Operating Expenses

Operating expenses for the third quarter of 2024 were $29.1m, which included $2.4m of non-cash stock-based compensation expense and $11.1m in depreciation and amortization expenses. Operating expenses for the third quarter of 2023 were $29.0m, which included $2.3m in non-cash stock-based compensation expense and $11.3m in depreciation and amortization expenses. Excluding the non-cash stock-based compensation and depreciation and amortization expenses from both years, cash operating expenses(2) for the third quarter of 2024 were $15.6m, flat compared to cash operating expenses of $15.4 m for the third quarter of 2023.

Net Loss/Income

Net loss for the third quarter of 2024 was $12.6m, compared to a net income of $0.7m in the third quarter of 2023. The year-over-year decrease of $13.3m was primarily driven by fluctuations in the Company’s equity warrants and other equity instruments that are measured at fair value and driven by the Company’s common stock price, which resulted in changes in the gain on derivatives.

Adjusted EBITDA

Adjusted EBITDA for the third quarter of 2024 was $0.7m, compared to an adjusted EBITDA loss of $0.4m in the third quarter of 2023. The $1.1m year-over-year improvement was primarily driven by strong operating leverage achieved through higher revenues and improved gross margins.

Balance Sheet & Capital Expenditures

As of September 30, 2024, cash and cash equivalents, restricted cash, and short-term investments totaled $64.4m. This balance includes net equity proceeds of approximately $44.6m raised in the quarter, less a $10.0m debt repayment on the commercial bank line, which remains available to the Company should it choose to draw on it. In addition, the Company anticipates receiving approximately $26.7 m in payments over the next 12 months as interim milestones on a few major customer contracts are met and expected to be billed, further enhancing the Company’s liquidity. Capital expenditures for the third quarter of 2024 were $13.1m, bringing the year-to-date total capital expenditures to $40.7m.

2024 Outlook

BlackSky is starting to ramp up revenues from recent contract awards and continues to work on a number of sizable new and expansion contracts which have some degree of uncertainty surrounding the timing of close and start of revenue recognition. As such, 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 its Gen-3 satellites. (Source: BUSINESS WIRE)

07 Nov 24. Expect a strong second half from Solid State.

Simon Thompson: Order delays subdued first-half trading, but Donald Trump’s election win has shifted the dial

First-half revenue down 30 per cent to £62m
Pre-tax profit falls from £7.3m to £2.5m
Order intake improving and earnings guidance maintained
Forward price/earnings (PE) ratios of 16 (2025) and 13.8 (2026)

A first-half trading update from Redditch-based value-added electronics group Solid State (SOLI: 210p) prompted a 14 per cent reversal in its share price.

The main issue was that political uncertainty in both the UK and US led to delays in several programmes in the group’s systems division, which in turn contributed to weaker first-half order intake. Since the half-year-end, the US business has seen some improvement while the UK operations has remained sluggish.

The group’s systems division was already up against a tough comparator. That’s because an exceptional defence order from Nato contributed £23.4m to divisional revenue and bumper earnings in the first half of the prior year. Excluding these shipments, management reports 7 per cent growth in divisional revenue to £35m on a constant currency basis. The directors also note that there are “similar significant opportunities for material projects and revenues to be secured in future periods as the technology is adopted by a growing security and defence user base across the Nato alliance.”

Moreover, Solid State’s £77m order book at the start of the second half has since increased to £84m, of which £50m is expected to be billed by the 31 March 2025 financial year-end. Based on the improving order intake, and the near-term unconverted visible pipeline (mainly security and defence orders), the directors are maintaining full-year pre-tax profit guidance of £10.1m on annual revenue of £144m, in line with consensus forecasts.

Trump win catalyst for higher European defence spending

Of course, there is a risk that Solid State fails to convert all the orders needed to hit market expectations. That said, the Republican Party’s win in the US Presidential Election has shifted the dial given the strong views voiced by Donald Trump on the future role the country will play in defending Europe.

According to the well-respected Ifo Institute, defence spending above the Nato target of 2 per cent of gross domestic product (GDP) would be necessary for Europe to be able to defend itself without the protective umbrella of the US. “European countries would have to significantly increase their efforts because budgets have been too low for years to build up an adequate defence capability,” says Ifo Institute researcher Florian Dorn in a newly published research paper (“Defense Spending for Europe’s Security – How Much Is Enough?,” EconPol Policy Brief 66, 7 November 2024).

Solid State should be a major beneficiary as a UK-based systems provider, having direct exposure to Nato agencies and relationships with Tier 1 suppliers such as BAE Systems (BA.), which has seen its share price rally hard since the US presidential election result. Furthermore, the bespoke requirements on these contracts means that work on defence programmes can extend for multi-year periods, too.

So, with Solid State’s shares de-rated to modest forward price/earnings (PE) ratios of 16 (2025) and 13.8 (2026) since the group reported record annual results (‘A solid way to play the defence boom’, 9 July 2024), there is scope for a share price recovery as the trading environment improves and the pipeline of orders are secured. Hold. (Source: Investors Chronicle)

07 Nov 24. Leonardo, the BOD approves 9 months results. Growth performance across all kpis: orders € 14.8bn (+7.8%*), revenues €12.1bn (+12.4%*), ebita €766m (+15%*). Focf €-550m, up 13.7%*.

FY 2024 guidance confirmed.

Backlog at record level > €43bn with a book to bill at 1,2x
Effective delivery of backlog, especially across in Electronics and Helicopters
EBITA improvement driven by growing volumes, mainly in Electronics
Continuous improvement of FOCF
Group Net Debt at €3.1bn (-19%1)
Establishingof the JV with Rheinmetall strengthens the positioning in the international context
Net Results at €730m, including a one-off benefit of € 366 m for the fair value measurement of the Telespazio Group

* – vs 9M23 pro-forma

Leonardo’s Board of Directors, convened today under the Chairmanship of Stefano Pontecorvo, examined and unanimously approved the 2024 first nine months results.

“The economic-financial performance of the period, together with the development of the business and the strengthening of the financial indicators, plus the implementation of the existing efficiency program, is all confirming the validity of the path undertaken in pursuing the objectives indicated in the Industrial Plan.” – Roberto Cingolani, Leonardo CEO and GM, stated.

“The consolidation and strengthening of our core defense business is proceeding in line with the objectives we have set thanks to the acceleration of the digitalisation process and the rationalization of the portfolio. After the creation of the new Space Division, aimed at positioning in new business segments with higher added value, the sale of Underwater Armaments & Systems to Fincantieri, and the exit from non-core businesses such as Industria Italiana Autobus and Skydweller, Leonardo has finalized the acquisition, in the radar sector, of control of GEM Elettronica. The path of international alliances has seen the establishment of the Joint Venture with Rheinmetall, which allows the company to play a key international role in the programs of the new Main Battle Tank (MBT) and the new Lynx platform for the Armored Infantry program Combat System (AICS). This achievement, achieved in less than six months, demonstrates the strategic importance of moving with agility and determination in the international competitive scenario. We have defined, together with our customers and partners, the main elements of the GCAP program which will become definitive with the formal signing of an industrial agreement by the end of the year. These elements provide strategic activities in the development of systems of systems for Leonardo. The evaluation of growth and development opportunities in the cyber and space sector also continues”. Roberto Cingolani, Leonardo CEO and GM, concluded.

9M 2024 financial results

In order to make the Group’s operating performance more comparable, the indicators for the comparative period are also provided on a pro-forma basis, including the contribution of the Telespazio group, consolidated on a line-by-line basis starting from 1 January 2024.

In the first nine months of 2024, New Orders and Revenues increased by 11.1% (+7.8% compared to the pro-forma figure of September 2023) and by 17.6% (+12.4% compared to the pro-forma figure) respectively, driven in particular by the Defence Electronics & Security and Helicopters businesses. The growth of Revenues was accompanied by an increase in EBITA of 18.9% (+15.0% compared to the pro-forma figure), with a ROS for the period equal to 6.3% (in line with that at 30 September 2023, increasing compared to the pro-forma figure, equal to 6.2%).

Free Operating Cash Flow for the period also improved (+8.9%, +13.7% compared to the pro-forma figure), whose performance, together with the sale of the minority stake in Leonardo DRS, which occurred in the last quarter of 2023, resulted in a consequent positive impact on the Group’s net debt, which decreased by 18.2% compared to the comparative period (19.0% compared to the pro-forma figure).

Key Performance Indicators

The Key Performance Indicators for the comparative period are provided also on a pro-forma basis, including the effects of the line-by-line consolidation of Telespazio:

2024 Guidance

In view of the results achieved in the first nine months of 2024 and the expectations for the coming periods, we confirm the guidance for the full year 2024 as disclosed in March 2024.

Below is the summary table:

contracts, strategic investments, and other minor transactions.

Commercial Performance

New Orders, amounted to EUR 14,753m significantly increasing (+11.1%, +7.8% on the pro-forma figure) compared to the first nine months of 2023, with a particular positive performance of the Defence Electronics and Security (DES) business, both of the European DES component and of the subsidiary Leonardo DRS, as well as of Helicopters in the government and commercial fields. We also note an increase in the Cyber & Security Solutions and Aerostructures. The level of New orders is equal to a book to bill (the ratio of New orders to Revenues for the period) of about 1.2
Backlog, amounted to EUR 43,618m ensures a coverage in terms of production exceeding 2.5 years

Economic Performance

Revenues, amounted to EUR 12,076m, increased compared to the first nine months of 2023 (+17.6%, +12.4% on the pro-forma figure) in almost all business sectors, with a significant contribution from the Defence Electronics and Security and Helicopters sectors
EBITA, amounted to EUR766m, reflected the solid performance of the Group’s businesses, showing an increase compared to the first nine months of 2023 (+18.9%, +15.0% on the pro-forma figure), mainly as a result of the increase in the activity volumes. The period was particularly affected by the performance of the Defence Electronics and Security, sharply improving compared to the same period of the prior year, while the Space sector was affected by the expected difficulties in the manufacturing segment
EBIT, amounted to EUR636m, reported a growth (+18.4%, +15.2% on the pro-forma figure) despite being affected by an increase in non-recurring one-off charges, mainly due to the effects deriving from the positive termination and settlement of contracts entered into in previous years. Additionally, EBIT was also affected by the amortisation of the Purchase Price Allocation connected with the first-time consolidation of the Telespazio group starting from 1 January 2024. The above-said charges were partially offset by lower restructuring costs compared to the comparative period
Net Result before extraordinary transactions, amounted to EUR364m, (€m. 290 in the comparative period, €m. 298 on the pro-forma figure), benefitted from the improvement of EBIT and from lower finance costs, partially offset by the higher taxation for the period
Net Result, equal to EUR730m (€m. 301 in the comparative period, €mil. 309 on the pro-forma figure) included, in addition to the Net Result before extraordinary transactions, the capital gain (€mil. 366) recognised after the fair value measurement of the Telespazio group, carried out for the purposes of its line-by-line consolidation

Financial performance

Free Operating Cash Flow (FOCF), negative for EUR550m, improving compared to the performance at 30 September 2023 (negative for €mil. 604, negative for €m. 637 in the pro-forma figure), confirmed the positive results reached thanks to initiatives to strengthen the operational performance and the collection cycle, a careful investment policy in a period of business growth and an efficient financial strategy. The figure however highlighted the usual interim trend that is characterised by significant cash absorptions during the first part of the year
Group Net Debt, of EUR3,120m, reduced significantly (about €bn. 0.7) against September 2023, thanks to the strengthening of the Group’s cash generation and to the sale of the minority stake in Leonardo DRS, occurred in the last quarter of 2023. Compared to 31 December 2023 (€m. 2,323) the value increased mainly as a result of the FOCF performance, in addition to the payment of dividends for an amount equal to €m. 177 (of which €mil. 160 relating to Leonardo S.p.a.) and to the signing of new lease agreements in the period, for a value of €m. 39

SECTOR PERFORMANCE

The Key Performance Indicators of the business Sectors are reported below while pointing out that – starting from 1 January 2024 – the contribution from the line-by-line basis consolidation of the Telespazio group is included in the Space sector. Furthermore, with the purpose of providing a representation mode increasingly in line with the Group’s corporate strategies and the underlying business trends, the Defence Electronics & Security and Cyber & Security Solutions sectors, which were aggregated until the 2023 Financial Statements within the Defence Electronics & Security only. The Sectors’ performance will be therefore represented and commented on with reference to the following operating sectors: Helicopters, Defence Electronics & Security, Cyber & Security Solutions, Aircraft, Aerostructures and Space (Helicopters, Defence Electronics & Security, Aircraft, Aerostructures and Space in the 2023 financial statements).

In order to make operating performance comparable, the indicators for the comparative period have been restated in this section for ease of comparison. With reference to the Space sector, the comparative period is presented on a pro-forma basis, including the contribution of the Telespazio group.

06 Nov 24. Astronics Corporation Reports 25% Growth in Sales in 2024 Third Quarter

Sales increased $40.8m to $203.7m, highest quarterly level since the first quarter of 2019
Higher sales drove Aerospace operating income of $14.3m, or 8.0%; Adjusted Aerospace operating income1 was $25.3m, or 14.2% of sales
Net loss for the quarter of $11.7m, or $0.34 per diluted share, included impact of $7.0m in refinancing costs; Adjusted net income1 was $12.2m, or $0.35 per diluted share
Adjusted EBITDA1 grew 207% to $27.1m, or 13.3% of sales, up $18.2m over the prior-year period and up $6.8m over trailing second quarter
Generated $8.5m in cash from operations in the quarter
Bookings in the quarter were $189.2m, driving backlog of $611.9m with book to bill ratio of 0.93x
Revised 2024 revenue guidance to a new range of $777m to $797m

Astronics Corporation (Nasdaq: ATRO) (“Astronics” or the “Company”), a leading supplier of advanced technologies and products to the global aerospace, defense, and other mission-critical industries, today reported financial results for the three and nine months ended September 28, 2024.

Peter J. Gundermann, Chairman, President and Chief Executive Officer, commented, “We delivered a solid third quarter operationally. Revenue was at the high end of our range, up 25% over the comparator quarter. Adjusted EBITDA was $27.1m for the quarter and $91m for the trailing twelve months. Operating margins improved from both volume and the initiatives we have executed to drive profitability. Our Aerospace segment adjusted operating margin was 14.2%. We are clearly making progress towards our operational goals, though our results include the impact of expenses related to our July refinancing, a customer bankruptcy and a warranty reserve. All in all, we feel it was another quarter of progress as we continue to recover from the disruption of the past few years.”

1 Adjusted gross profit, adjusted gross margin, adjusted operating income, adjusted operating margin, adjusted segment operating profit, adjusted segment operating margin, adjusted EBITDA, adjusted EBITDA margin, adjusted net income and adjusted diluted earnings per share (“EPS”) are Non-GAAP Performance Measures. Please see the reconciliation of GAAP to non-GAAP performance measures in the tables that accompany this release.

Consolidated sales were up $40.8m, or 25.0%. Aerospace sales increased $35.5m and Test Systems sales increased $5.3m.

Gross profit increased $22.1m to $42.7m, or 21.0% of sales. Adjusted gross profit1 for the 2024 third quarter was $47.2m, or 23.2% of sales. Third quarter gross profit was negatively impacted by a $3.5 m atypical warranty reserve related to a new product launch that requires a field modification, and a $0.9m inventory reserve related to a bankruptcy filing for an Aerospace customer. The comparator quarter of 2023 included a $3.6m write-down of inventory related to a separate customer bankruptcy.

Third quarter 2024 selling, general and administrative expenses (“SG&A”) included $1.3m in reserves for outstanding receivables and fixed asset impairment related to the bankruptcy filing of an Aerospace customer compared to a separate bankruptcy reserve of $7.5m against outstanding receivables in the prior year.

Despite the unusual impacts to gross profit and operating income, consolidated operating income increased $22.9m to $8.4m, or 4.1% of sales, compared with operating loss of $14.5m in the prior-year period. Adjusted operating income1 for the 2024 third quarter was $19.6 m, or 9.6% of sales.

Improved operating income reflects the operating leverage gained on higher sales volume, partially offset by $4.5m for resumed incentive programs, an increase of $1.9m in litigation-related legal expenses and reserve adjustments in 2024 and a $3.2m increase in non-bankruptcy related inventory reserves.

Third quarter 2024 expenses included a $3.2m call premium on the previous term loan and the write-off of $3.8m of associated deferred financing costs. The $7.0 m total has been reflected as Loss on Extinguishment of Debt.

Tax expense in the quarter was $6.6m, primarily due to a valuation allowance applied against the deferred tax asset associated with research and development costs that are required to be capitalized for tax purposes.

Consolidated net loss was $11.7m, or $0.34 per diluted share, measurably improved compared with the net loss of $17.0m, or $0.51 per diluted share, in the prior year. Adjusted net income1 for the 2024 third quarter was $12.2m, or $0.35 per diluted share.

Consolidated adjusted EBITDA1 increased to $27. m, or 13.3% of consolidated sales, compared with adjusted EBITDA1 of $8.8m, or 5.4% of consolidated sales, in the prior-year period primarily as a result of increased profitability from higher sales.

Bookings were $189.2 m in the quarter resulting in a book-to-bill ratio of 0.93:1. For the trailing twelve months, bookings totaled $795.5m and the book-to-bill ratio was 1.02:1.

Aerospace Segment Review

Aerospace Third Quarter 2024 Results (compared with the prior-year period, unless noted otherwise)

Aerospace segment sales increased $35.5m, or 24.9%, to $177.6m. The improvement was driven by a 31.6% increase, or $32.1m, in Commercial Transport sales. Sales to this market were $133.9m, or 65.8% of consolidated sales in the quarter, compared with $101.7m, or 62.5% of consolidated sales in the third quarter of 2023. Growth was primarily related to increased demand by airlines for inflight entertainment & connectivity (“IFEC”) products which are in Electrical Power & Motion and Avionics product groups.

Military Aircraft sales increased $5.0m, or 30.0%, to $21.7m, driven by progress on the FLRAA program. General Aviation sales increased $1.9 m, or 11.6%, to $18.1 m due to higher VVIP sales. Other sales decreased $3.6m as the Company is winding down its non-core contract manufacturing arrangements.

Aerospace segment operating profit of $14.3m was up $21.7m compared with operating loss of $7.5m in the same period last year. Operating margin was 8.0%. Adjusted Aerospace operating profit1 was $25.3m, an increase of $20.3m, or over five times the prior-year period. Adjusted Aerospace operating margin1 expanded 10.7 points to 14.2% reflecting the leverage gained on higher volume and improving production efficiencies.

The segment’s operating profit in the third quarter of 2024 was impacted by $3.5m in warranty expense related to the previously-mentioned field modification, $5.1m in litigation-related legal expenses and reserve adjustments related to an ongoing patent dispute, $3.9m in inventory reserves, $3.2m in compensation expense related to the resumption of the Company’s incentive programs, and a non-cash reserve associated with a customer bankruptcy of $2.2m.

Aerospace bookings were $173.6m for a book-to-bill ratio of 0.98:1. Backlog for the Aerospace segment was $543.6m at quarter end and excludes $9.3m of backlog that was associated with the customer bankruptcy referred to previously.

Mr. Gundermann commented, “Our Aerospace business had a strong quarter, with sales up 24.9% over the comparator quarter and adjusted operating income1 achieving our targeted mid-teens level of 14.2%. We achieved this despite the Boeing strike, which hurt revenue in the quarter by about $2m, with bookings impacted by approximately $7m to $8m. Given the measurably improved profitability, we are pleased with our Aerospace performance during the quarter.”

Test Systems Segment Review

Test Systems Third Quarter 2024 Results (compared with the prior-year period, unless noted otherwise)

Test Systems segment sales were $26.1m, up $5.3m. The improvement was driven by the U.S. Marine Corps’ Handheld Radio Test Sets (“HHRTS”) and the U.S. Army’s TS-4549/T programs, which contributed $5.3m and $1.2m, respectively, in sales during the quarter.

Test Systems segment operating loss was near break-even, compared with operating loss of $1.8m in the third quarter of 2023. The improvement was the result of lower litigation-related legal expenses, partially offset by additional compensation expense from the resumption of the Company’s incentive programs. Test Systems continues to be negatively affected by mix and under absorption of fixed costs at current volume levels.

Additional restructuring initiatives were implemented in the 2024 fourth quarter. In October 2024, the Company offered a voluntary separation program which is currently expected to provide annualized savings of approximately $2m, beginning in the first quarter of 2025. The Company expects to record severance expense of approximately $1m in the fourth quarter of 2024 related to this initiative.

Bookings for the Test Systems segment in the quarter were $15.6m. The book-to-bill ratio was 0.60:1 for the quarter. Backlog for the Test Systems segment was $68.2m at quarter end.

Mr. Gundermann commented, “Our Test business had some success in the third quarter, with revenue up 25.6%. The business has initiated further restructuring to focus on the most critical initiatives going forward, including the radio test program for the U.S. Army, which is now expected to enter volume production in the second half of 2025.”

Liquidity and Financing

Cash provided by operations in the third quarter of 2024 was $8.5m, primarily the result of increased net income, after adjusted for non-cash expenses.

Capital expenditures in the quarter were $1.9m and $5.2m year-to-date. Net debt was $174.6m, up from $161.2m at December 31, 2023.

On July 11, 2024, the Company announced it had amended and expanded its revolving line of credit and refinanced its term loan. The refinancing provided improved liquidity, lower cash costs, and greater financial flexibility for the Company. The refinancing was comprised of an expanded asset-based line of credit and a reduced, lower-cost term loan. Both mature in July 2027.

Legal Proceedings

Since 2010, the Company has been defending itself in a long-running series of patent infringement cases brought by a single plaintiff. Cases were filed in the United States, France, Germany, and the United Kingdom (UK).

The United States case was resolved in 2017, when the court found that the patent was not novel and was therefore invalid.

The French case similarly found that the subject patent was invalid, though the plaintiff is seeking to appeal that decision.

The German court dismissed some claims of the patent but upheld others and found that Astronics had been infringing. The Company has paid $3.5m in penalties and interest to date and has taken a reserve of $17.3m to cover estimated damages and associated interest. Damages proceedings in this case are likely to conclude in 2026.

Unlike in the US, French, and German proceedings, the UK court fully upheld the subject patent and found that the Company was infringing. A damages hearing was conducted in October 2024 and a ruling is expected later this year or early in 2025. Astronics reserved $7.4 m to cover anticipated damages, but the plaintiff is seeking damages of up to approximately $105 m, excluding interest. Based on UK legal practices, the Company expects that some amount of damages may be due in early 2025. The Company is engaged with its lenders to seek to arrange financing to cover the wide range of possible outcomes and satisfy any potential damages award as required.

The Company believes that permission will be granted to either or both of the parties to appeal the judgement to a higher court subsequently.

All patents related to the infringement cases have expired years ago and the lawsuits do not restrict the Company’s current business activities.

2024 Outlook

The Company expects fourth quarter sales of $190m to $210m and is adjusting its 2024 revenue guidance to $777m to $797m. The midpoint of this range would be a 14.2% increase over 2023 sales. Astronics considered the broad range of factors affecting the business, including the work stoppage at Boeing, in issuing its guidance.

Backlog at the end of the third quarter was $611.9m. Planned capital expenditures in 2024 are expected to be in the range of $9m to $11m.

Mr. Gundermann commented, “We are closing in on another year of strong double-digit growth. Assuming we attain the mid-point of the range for 2024, we will have averaged 21% growth over each of the last three years. Our profitability has benefited from the growth and the many improvement initiatives we have implemented over the last several years, and we believe 2025 will see a continuation of these trends.”

(Source: BUSINESS WIRE)

05 Nov 24. BigBear.ai Announces Third Quarter 2024 Results.

Awarded 5-year production contract valued at $165m, beginning in Q4 2024, to deliver the U.S. Army’s Global Force Information Management – Objective Environment (GFIM-OE).
Demonstrated ConductorOS, the Company’s distributed AI orchestration platform, in a live environment at the U.S. Department of Defense’s (DoD’s) Rapid Defense Experimentation Reserve Technology Readiness Experimentation (RDER T-REX)24-2 event and is showcasing capabilities of ConductorOS in the U.S. Navy’s Mission Autonomy Proving Ground (MAPG) series of exercises through the rest of 2024.
Revenue increased 22.1% to $41.5m compared to $34.0m in 2023.
Gross margin increased to 25.9% in the third quarter of 2024 compared to 24.7% in 2023.
Net loss of $12.2m and non-GAAP Adjusted EBITDA* of positive $0.9m.
Cash balance of $65.6m as of September 30, 2024; $1.9m net cash used in operating activities in the third quarter.
Affirming full-year 2024 revenue guidance between $165m and $180m.

BigBear.ai Holdings, Inc. (NYSE: BBAI) (“BigBear.ai” or the “Company”), a leader in AI-powered decision intelligence solutions, today announced financial results for the third quarter of 2024 and issued an investor letter that has been posted to the Investor Relations section of the Company’s website.

“Our third quarter financials show that we are continuing to build a long-term sustainable business, with good cash reserves and steady progress. The headwinds we face as a business are unchanged: the cautious approach of governments and regulators towards artificial intelligence means our business will remain lumpy, and we understand these challenges and are navigating them thoughtfully,” said Mandy Long, CEO of BigBear.ai.

“The route to the long-term success of BigBear.ai lies in both the expertise of our team members and the quality and relevancy of our technology. You can read more details in our letter to investors published today,” she continued.

Financial Highlights

Revenue increased 22.1% to $41.5m for the third quarter of 2024, compared to $34.0m for the third quarter of 2023.
Gross margin increased to 25.9% in the third quarter of 2024 as compared to 24.7% in the third quarter of 2023, partially driven by higher margin commercial solutions in the third quarter of 2024 compared to the third quarter of 2023.
Net loss of $12.2m for the third quarter of 2024, compared to net income of $4.0m for the third quarter of 2023. The increase in net loss was primarily driven by a decreased benefit from the changes in fair value of warrants. The benefit of the change of the fair value of derivatives was $1.3m in the third quarter of 2024 compared to $15.7m in the third quarter of 2023.
Non-GAAP Adjusted EBITDA* of positive $0.9m for the third quarter of 2024 compared to $0.2m for the third quarter of 2023, primarily driven by improved gross margins and continued focus on cost management.
SG&A of $17.5m for the third quarter of 2024 compared to $15.5m for the third quarter of 2023, partially due to increased headcount, as well as higher costs related to non-recurring integration, strategic initiatives, and non-recurring litigation.
Ending backlog was $437m as of September 30, 2024.
The consolidated year-to-date results include results from Pangiam from the acquisition date of February 29th, 2024 to the end of September 2024.

Momentum

BigBear.ai awarded production contract to deliver the U.S. Army’s GFIM-OE — The U.S. Army awarded BigBear.ai a five-year, $165.15m sole source prime contract for GFIM production services. Since 2021, BigBear.ai has been working with the Army to transform 15 legacy systems into an enterprise-wide intelligent automation platform, supporting the Secretary of the Army’s vision for data-centric force management. Building on the contributions through Phase 1 and Phase 2, this contract will support the continued development and transition of GFIM-OE capabilities to production.
BigBear.ai and Concept Solutions team awarded shared IDIQ contract with Federal Aviation Administration (FAA) — BigBear.ai received an award as a subcontractor to Concept Solutions, LLC (CS). CS is one of 14 companies awarded a FAA Information Technology Innovative Procurement Strategic Sourcing (ITIPSS) contract supporting the Office of Information Technology (AIT). This multiple-award IDIQ contract, with a $2.4bn shared ceiling over ten years, will enable the FAA to acquire a full range of IT capabilities, solutions, and emerging technologies, offering state-of-the-art IT-related service solutions.
BigBear.ai implemented biometric boarding solutions for Denver International Airport (DEN) — BigBear.ai announced a successful installation of veriScan, BigBear.ai’s biometric verification solution, at DEN. veriScan is now deployed at 14 international departure gates at DEN, impacting the boarding process for over 46,600 international departing passengers.
ConductorOS excellence at RDER T-REX24-2 — BigBear.ai demonstrated ConductorOS, BigBear.ai’s AI orchestration platform, at the DoD Office of the Under Secretary of Defense for RDER T-REX24-2 event highlighting its capabilities in edge AI orchestration. ConductorOS was recognized as a Tier 1 technology.
BigBear.ai participates in U.S. Navy MAPG exercises — BigBear.ai announced its participation in previous and upcoming showcases with the U.S. Navy’s MAPG series of exercises in the second half of 2024, providing maritime domain awareness and edge AI orchestration. In collaboration with the U.S. Navy, BigBear.ai will continue to showcase ConductorOS, BigBear.ai’s AI, data and sensor orchestration platform, to demonstrate multi-vendor interoperability and AI deployment for the maritime domain.
BigBear.ai announced the promotion of Carl Napoletano to Chief Operating Officer — Napoletano will continue to report directly to CEO Mandy Long. Napoletano has held a number of senior leadership positions at BigBear.ai, most recently serving as Vice President of Special Projects, where he oversaw the strategic integration of major acquisitions, including Pangiam.
BigBear.ai receives additional “Awardable” status for DoD’s work in the Chief Digital and Artificial Intelligence Office’s (CDAO) Tradewinds Solutions Marketplace – BigBear.ai announced additional “Awardable” status through the CDAO Tradewinds Solutions Marketplace. The Tradewinds Solutions Marketplace is the premier offering of Tradewinds, the DoD’s suite of tools and services designed to accelerate the procurement and adoption of Artificial Intelligence (AI)/Machine Learning (ML), data, and analytics capabilities. Available capabilities include Trueface, BigBear.ai’s proprietary facial recognition software, and support for the U.S. DoD Joint Staff J3’s ORION, a technology-enabled decision-making platform. (Source: BUSINESS WIRE)

06 Nov 24. IonQ (NYSE: IONQ) announced that it has reached a definitive agreement to acquire substantially all of the operating assets of Qubitekk, Inc., a leading Vista, CA-based quantum networking company. As part of the transaction, the Qubitekk team will join IonQ to further enhance IonQ’s leading position in the quantum networking industry. IonQ anticipates closing the acquisition within the next six months, subject to the satisfaction of certain closing conditions.

“The combination of Qubitekk and IonQ will allow us to continue our momentum in quantum networking. Quantum networking and quantum computing are highly synergistic for IonQ. I expect that the quantum networking part of IonQ could be the first division to be cash flow positive.”

From the start, IonQ has prioritized quantum networking as a key strategy for scaling its quantum computers. Specifically, IonQ’s architecture plans to use photonic interconnects to link multiple quantum computers together, creating a more powerful cluster. The years that IonQ has dedicated to developing this technology for its computing efforts have allowed IonQ to quickly advance its offerings in the quantum networking industry.

Once closed, the Qubitekk acquisition will represent a major addition to IonQ’s quantum networking capabilities and customer set. IonQ believes the transaction will contribute to near-term bookings and revenue opportunities, extending IonQ’s commercial leadership in quantum networking.

“Our acquisition of Qubitekk will mark a significant step in IonQ’s expansion into the quantum networking market, where IonQ will be a clear leader in both quantum networking and quantum computing,” said Peter Chapman, President and CEO of IonQ. “The combination of Qubitekk and IonQ will allow us to continue our momentum in quantum networking. Quantum networking and quantum computing are highly synergistic for IonQ. I expect that the quantum networking part of IonQ could be the first division to be cash flow positive.”

Qubitekk’s executive team and employee base including physicists, engineers, software developers, and others will join IonQ to further drive quantum networking efforts. The Qubitekk team joining IonQ includes Co-Founder and CEO Stan Ellis, Co-Founder and CTO Dr. Duncan Earl, Chief Revenue Officer Corey McClelland, and President Keith Clark.

The deal will also significantly expand IonQ’s quantum networking expertise and technology portfolio with 118 U.S. and international patents in the areas of quantum networking hardware and quantum network security and protection.

“Qubitekk is thrilled to be joining IonQ to capitalize on our early advantage in the quantum networking space,” said Stan Ellis, Co-Founder and CEO of Qubitekk. “We have admired IonQ as the pioneering quantum company, with powerful computing systems and a demonstrated commitment to quantum networking as critical infrastructure. Uniting Qubitekk with IonQ will allow us to pursue the quantum-enabled internet as a near-term reality.”

IonQ’s acquisition of Qubitekk follows closely on the heels of a series of recent quantum networking announcements from IonQ. In September, IonQ announced the largest known 2024 U.S. Quantum Contract Award of $54.5 m with United States Air Force Research Lab (AFRL) to design, develop and deliver quantum networking technology. Recently, IonQ demonstrated remote ion-ion entanglement as a key milestone towards scaling its compute across multiple quantum processors using photonic interconnects. Earlier this year, IonQ announced that it was selected by the Applied Research Laboratory for Intelligence and Security (ARLIS) for a quantum networking contract to design a first-of-its-kind, networked system for blind quantum computing. Blind quantum computing enables quantum computers to operate while remaining ‘blind’ to what information is being processed through them.

Advisor

Wilson Sonsini Goodrich & Rosati is serving as legal counsel to IonQ.

About IonQ

IonQ, Inc. is a leader in quantum computing that delivers high-performance systems capable of solving the world’s largest and most complex commercial and research use cases. IonQ’s current generation quantum computer, IonQ Forte, is the latest in a line of cutting-edge systems, boasting 36 algorithmic qubits. The company’s innovative technology and rapid growth were recognized in Fast Company’s 2023 Next Big Things in Tech List and Deloitte’s 2023 Technology Fast 500™ List, respectively. Available through all major cloud providers, IonQ is making quantum computing more accessible and impactful than ever before. Learn more at IonQ.com. (Source: BUSINESS WIRE)

06 Nov 24. Capital LLC (“Sagewind”), a government technology-focused U.S. private equity firm with offices in New York City and the Washington, DC area, announced today a majority investment in Sabel Systems Technology Solutions LLC (“Sabel” or the “Company”). Sabel is a leading provider of digital R&D, acquisition and sustainment solutions to the U.S. Department of Defense (“DoD”) and other government agencies.

Founded in 2001 and headquartered in Dayton, Ohio, Sabel unlocks the power of digital engineering for the DoD. The Company’s Digital Engineering Cloud (“DEC”) allows the DoD to accelerate R&D, and enhance agility, scalability and connectivity needed to work more effectively and efficiently. The DEC harmonizes commercial software and gives users access to many powerful engineering and business systems applications in one virtual environment. When it comes to building the operational systems of the future, DEC users have access to the computing power and Sabel tradecraft that enable mission success every day. Today, Sabel and the DEC are serving on missions ranging from modeling and simulation, product lifecycle management, the development of cutting-edge manned/unmanned platforms, and enterprise-wide compliance.

Chris Sharbaugh and Doug Kinyon, Managing Principals of Sabel Systems, said, “Sabel is excited to partner with Sagewind in charting the next chapter of our growth in the digital engineering and cyber solutions marketplace. Sagewind has a strong track record of backing management teams to help them grow their businesses through internal investment and acquisitions, which is exactly what we need to best support our customers’ growing requirements. We are excited about the opportunity to expand our offerings, accelerate our growth, and provide greater opportunities for our employees.”

Steven Lefkowitz, Managing Partner of Sagewind Capital, said, “Sabel is executing on critical digital transformation initiatives for its customers. These initiatives enable the use of better technology that ultimately strengthens teams within and outside the government. The work that Chris and Doug undertake – together with Principals Mike Magnusson, Matthew Cho and Jeff Aldrich, and the entire Sabel team – makes our government more effective. We are excited to partner with the Sabel team and continue building together for the future.”

Sabel Systems is Sagewind’s eighth platform investment in the government technology sector. Including Sabel, Sagewind has six active government technology platform investments.

KippsDeSanto & Co. served as financial advisor to Sabel Systems and Protorae Law PLLC provided legal counsel. Paul, Weiss, Rifkind, Wharton & Garrison LLP provided M&A legal counsel to Sagewind Capital and Morrison & Foerster LLP provided counsel on government matters.

About Sabel Systems

Sabel Systems specializes in delivering innovative solutions to drive digital transformation for Government and private sector clients. With expertise in Industry 4.0, Digital Engineering, IIoT, and RPA, Sabel helps clients leverage technology to streamline operations. The company’s more than 200 employees serve the Air Force, Army, Space Force, Marine Corps and other key defense and commercial customers. Sabel Systems is headquartered in Dayton, Ohio near Wright Patterson Air Force Base. For more information, please visit www.sabelsystems.com.

About Sagewind Capital

Sagewind Capital LLC, a U.S. company, is a government technology-focused private equity firm with offices in both New York City and the Washington, DC area. Sagewind seeks to partner with exceptional management teams and focuses on significant capital appreciation by helping businesses grow organically and through strategic acquisitions. The firm is focused on long-term capital appreciation and has the flexibility to own businesses for extended periods. For more information please visit www.sagewindcapital.com.

(Source: BUSINESS WIRE)

06 Nov 24. Howmet Aerospace Reports Third Quarter 2024 Results

Revenue Up 11% Year Over Year; Strong Profit and Cash from Operations

$282m Debt Reduction; $100 M Deployed for Common Stock Repurchases

2025 Preliminary Revenue Guidance: Up Approximately 7.5% Year over Year

Howmet Aerospace (NYSE:HWM):

Third Quarter 2024 GAAP Financial Results

Revenue of $1.84bn, up 11% year over year, driven by commercial aerospace, up 17%, partially offset by commercial transportation, down 12%
Net income of $332m versus $188m in the third quarter 2023; earnings per share of $0.81 versus $0.45 in the third quarter 2023
Operating income margin of 22.9%
Generated $244m of cash from operations; $441m of cash used for financing activities; and $80m of cash used for investing activities
Share repurchases of $100m; $0.08 per share dividend on common stock

Third Quarter 2024 Adjusted Financial Results

Adjusted EBITDA excluding special items of $487m, up 27% year over year
Adjusted EBITDA margin excluding special items of 26.5%
Adjusted operating income margin excluding special items of 22.8%
Adjusted earnings per share excluding special items of $0.71, up 54% year over year
Generated $162m of free cash flow

Third Quarter Key Announcements

Redeemed the remaining outstanding principal amount of $205 m of its 5.125% Notes due October 2024 with cash on hand
Issued $500m aggregate principal amount of notes due 2031 (the “2031 Notes”)
Redeemed the remaining outstanding principal amount of $577m of its 6.875% Notes due May 2025 with proceeds from the 2031 Notes plus cash on hand
All combined debt actions year to date through the third quarter 2024 will reduce annualized interest expense by approximately $33m
Repurchased $100m of common stock at an average price of $94.22 per share
Increased the common stock dividend by 60% to $0.08 per share
Raised full year 2024 guidance for Adjusted EBITDA*1 and Adjusted earnings per share*1 above the third quarter 2024 outperformance despite industry challenges

Third Quarter 2024 Segment Performance

Engine Products reported revenue of $945m, an increase of 18% year over year, due to growth in the commercial aerospace, defense aerospace, industrial gas turbine and oil & gas markets. Segment Adjusted EBITDA was a record $307m, up 40% year over year, driven by growth in the commercial aerospace, defense aerospace, industrial gas turbine and oil & gas markets. The Segment absorbed approximately 235 net headcount in the quarter and 985 year to date through the third quarter 2024 in support of expected revenue increases. Segment Adjusted EBITDA margin increased approximately 510 basis points year over year to a record 32.5%.

Fastening Systems

Fastening Systems reported revenue of $392m, an increase of 13% year over year due to growth in the commercial aerospace market, including wide body aircraft recovery. Segment Adjusted EBITDA was $102m, up 34% year over year, driven by growth in the commercial aerospace market. Segment Adjusted EBITDA margin increased approximately 420 basis points year over year to 26.0%.

Engineered Structures

Engineered Structures reported revenue of $253m, an increase of 11% year over year due to growth in the commercial aerospace and defense aerospace markets. Segment Adjusted EBITDA was $38m, up 27% year over year, driven by growth in the commercial aerospace and defense aerospace markets. Segment Adjusted EBITDA margin increased approximately 180 basis points year over year to 15.0%.

Forged Wheels

Forged Wheels reported revenue of $245m, a decrease of 14% year over year due to lower volumes in the commercial transportation market as well as a decrease in aluminum cost pass through. Segment Adjusted EBITDA was $64m, a decrease of approximately 17% year over year. Segment Adjusted EBITDA margin decreased approximately 90 basis points year over year to 26.1%.

Redeemed Remaining $205m of 5.125% Notes due October 2024 on July 1, 2024

On July 1, 2024, Howmet Aerospace completed the redemption of the remaining outstanding principal amount of $205 m of its 5.125% Notes due October 2024 (the “2024 Notes”). The 2024 Notes were redeemed with cash on hand at an aggregate redemption price of approximately $208m, including accrued interest of approximately $3m.

Issued $500m of 2031 Notes at an Effective Rate of 3.72% in August 2024; Redeemed Remaining $577m of 6.875% Notes due May 2025

On August 22, 2024 the Company issued $500 m aggregate principal amount of 4.850% Notes due October 2031 (the “2031 Notes”). The Company entered into a cross-currency swap to synthetically convert the 2031 Notes into a Euro liability of approximately €458m with a fixed annual interest rate of 3.72%.

On August 23, 2024 the Company redeemed the remaining outstanding principal amount of $577m of its 6.875% Notes due May 2025 (the “2025 Notes”). The 2025 Notes were redeemed with proceeds from the 2031 Notes plus cash on hand at an aggregate redemption price of approximately $594m, including accrued interest of approximately $12m.

All combined debt actions year to date through the third quarter 2024 will reduce annualized interest expense by approximately $33m.

All of the Company’s outstanding debt is unsecured and at fixed interest rates. The Company’s next debt maturity is in November 2026.

Repurchased $100m of Common Stock in Third Quarter 2024, $90m in October 2024

In the third quarter 2024, Howmet Aerospace repurchased $100m of common stock at an average price of $94.22 per share, retiring approximately 1.1m shares. Through the third quarter 2024, the Company has repurchased $310m of common stock at an average price of $76.75 per share, retiring approximately 4m shares. In October 2024, the Company repurchased an additional $90m of common stock at an average price of $103.15 per share, retiring approximately 0.9 m shares. As of October 31, 2024, total share repurchase authorization available was $2,297m. (Source: BUSINESS WIRE)

06 Nov 24. VSE Corporation (NASDAQ: VSEC, “VSE”, or the “Company”), a leading provider of aftermarket distribution and repair services, announced today results for the third quarter 2024.

THIRD QUARTER 2024 RESULTS(1)

(As compared to the Third Quarter 2023)

Total Revenues of $273.6m increased 18.3%
GAAP Net Income of $11.7m decreased 3.8%
GAAP EPS (Diluted) of $0.63 decreased 21.3%
Adjusted EBITDA(2) of $33.2m increased 2.6%
Adjusted Net Income(2) of $13.1m decreased 5.3%
Adjusted EPS (Diluted)(2) of $0.71 decreased 22.8%

MANAGEMENT COMMENTARY

“We are very pleased to announce our third quarter 2024 results, marked by the strongest quarterly performance in our Aviation segment’s history, achieving a revenue milestone of over $200 m,” stated John Cuomo, President and CEO of VSE Corporation. “The 34% year-over-year revenue growth, combined with record profitability, reflects balanced contributions across our Aviation business units. The key drivers to our growth include the successful execution of new distribution awards, the expansion of our maintenance, repair, and overhaul (“MRO”) capabilities, the launch of our new OEM-licensed manufacturing program, and contributions from our recent acquisition of Turbine Controls (“TCI”).”

Mr. Cuomo continued, “Additionally, during the quarter, we completed the integration of Desser Aerospace’s U.S. distribution business, launched a new Aviation e-commerce platform, made substantial progress in establishing our OEM-licensed manufacturing capabilities, and began distributing new products through our European Distribution Center of Excellence in Hamburg, Germany. The Aviation segment continues to perform successfully during a year of repositioning and focused execution.

“In our Fleet segment, we continue to advance our customer diversification strategy, with our commercial customers representing 64% of segment revenue as of the third quarter. Following a temporary reduction in activity with the United States Postal Service (“USPS”) due to their system integration, activity levels have stabilized at the quarter’s end, positioning us for improved revenue and profitability in the fourth quarter as compared to the third quarter,” Mr. Cuomo concluded.

“Our third quarter 2024 results reflect our commitment to financial discipline,” stated Adam Cohn, Chief Financial Officer of VSE Corporation. “During the quarter, we generated positive free cash flow, reduced our debt, and maintained an adjusted net leverage ratio within our target range of 3.0 to 3.5 times. Following our successful October 2024 equity offering, the Company has ample financial liquidity and flexibility to complete the acquisition of Kellstrom Aerospace in the fourth quarter and capitalize on the significant growth opportunities that lie ahead. As we look out to the fourth quarter, we expect to drive stronger free cash flow supported by ongoing operational execution on the strategic inventory investments made earlier this year. As I step into my role as CFO, I am excited to join such a dynamic team and look forward to building on VSE’s impressive track record. In the months ahead, I am committed to enhancing shareholder value as we continue to execute on our strategic priorities.”

STRATEGIC UPDATE

KELLSTROM AEROSPACE ACQUISITION:

On October 15, 2024, VSE announced it signed a definitive agreement to acquire Kellstrom Aerospace Group, Inc. (“Kellstrom Aerospace”), a leading full-service aftermarket solutions provider of value-added distribution and technical services for the commercial aerospace aftermarket. Kellstrom’s portfolio of engine-focused products and MRO services, coupled with its technical advisory capabilities, expands VSE Aviation’s portfolio of product and service solutions in the high-growth commercial aftermarket.
Kellstrom generated approximately $175m of revenue for the trailing-twelve-month period ended September 2024. The Company expects to generate run-rate synergies of approximately $4m within 18 months of close. The total consideration for the acquisition is approximately $200m, comprised of approximately $185m in cash and approximately $15m of common shares of the Company, subject to working capital adjustments. The acquisition is expected to close in the fourth quarter of 2024, pending customary closing conditions, including regulatory review.

AVIATION NEW PROGRAM EXECUTION AND INTEGRATION UPDATE:

The Aviation segment continues to scale the new European distribution Center of Excellence in Hamburg, Germany, supporting the Pratt & Whitney Canada Europe, Middle East and Africa (“EMEA”) aftermarket product support program. The program is expected to be at a full year run-rate by the end of the fourth quarter of 2024.
The OEM-licensed manufacturing fuel control program continues to outpace expectations and contribute to the segment’s profitability. The Kansas facility expansion supporting the fuel control program is expected to be operational in the first quarter of 2025.
The integration of Desser Aerospace’s U.S. distribution business was completed in the third quarter of 2024. Desser Aerospace’s tire, tube, brake and battery product lines are now being sold under the VSE Aviation name, and tires are now being sold in Europe through the Company’s new distribution facility in Hamburg, Germany.
VSE Aviation’s new e-commerce site was successfully launched in the third quarter of 2024, focused on initial offerings including legacy Desser Aerospace products.

FLEET UPDATE:

The USPS transition to a new Fleet Management Information System (“FMIS”) platform was completed in the third quarter of 2024. Post-implementation, the Company expects an increase in repair activity, and subsequently, an increase in the usage of parts.
The e-commerce fulfillment distribution center continues to scale and support above-market growth and additional market share opportunities.
The Fleet segment strategic review remains in process, and the Company expects to provide an update in the coming months.

CORPORATE UPDATE:

In October 2024, VSE completed a follow-on equity offering of 1,982,757 shares of common stock at $87.00 per share, resulting in net cash proceeds of approximately $163.8m.
The net proceeds from the offering will be used to finance a portion of the Kellstrom Aerospace acquisition.

THIRD QUARTER SEGMENT RESULTS

Aviation segment revenue increased 34% year-over-year to a record $203.6m in the third quarter of 2024. The year-over-year revenue improvement was attributable to strong program execution of new and existing distribution awards, an expanded portfolio of MRO capabilities, and contributions from the TCI acquisition. Aviation distribution and MRO revenue increased 12% and 86%, respectively, in the third quarter of 2024, versus the prior-year period. The Aviation segment reported operating income of $25.4m in the third quarter, compared to $21.0m in the same period of 2023. Segment Adjusted EBITDA increased by 29% in the third quarter to $32.6m, versus $25.3m in the prior-year period. Adjusted EBITDA margin was 16.0%, a decline of approximately 60 basis points versus the prior-year period, driven by lower margin contributions from the TCI acquisition.

Fleet segment revenue decreased 11% year-over-year to $70.0m in the third quarter of 2024. Revenue from the USPS declined approximately 40% on a year-over-year basis. This revenue decline was primarily driven by USPS’ transition to a new Fleet Management Information System (“FMIS”) platform, which has resulted in a temporary reduction in maintenance related activities and reduced part requirements. The FMIS conversion was completed in the third quarter of 2024, supporting a modest recovery beginning in the fourth quarter of 2024. Revenue from commercial customers increased 20% on a year-over-year basis, driven by growth in e-commerce fulfillment and commercial fleet sales. Commercial, or non-USPS, revenue represented 64% of total Fleet segment revenue in the period. The Fleet segment reported operating income of $2.5m in the third quarter, compared to $8.5 m in the same period of 2023. Segment Adjusted EBITDA decreased 59% year-over-year to $3.8m, and Adjusted EBITDA margin declined approximately 620 basis points to 5.4%, primarily driven by the decline in USPS revenue.

FINANCIAL RESOURCES AND LIQUIDITY

As of September 30, 2024, the Company had $189m in cash and unused commitment availability under its $350m revolving credit facility maturing in 2026. The Company generated approximately $4m of free cash flow in the third quarter of 2024. As of September 30, 2024, VSE had a total net debt outstanding of $442m. Adjusted net leverage was approximately 3.3 times trailing-twelve-month Adjusted EBITDA as of the end of the third quarter.

GUIDANCE

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

Aviation segment full-year 2024 revenue guidance is increasing from 34% to 38% growth to 39% to 41%, as compared to the prior year revenue. Revenue contributions from the Kellstrom acquisition, which is expected to close in the in the fourth quarter of 2024, are not included in our updated guidance.
Aviation segment maintains full-year 2024 Adjusted EBITDA margin guidance of 15.5% to 16.5%.

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

Fleet segment full-year 2024 revenue guidance is decreasing from 0% to 5% to (5)% to (10)%, as compared to the prior year revenue.
Fleet segment maintains full-year 2024 Adjusted EBITDA margin guidance of 6% to 8%. (Source: BUSINESS WIRE)

06 Nov 24. Teledyne Technologies Incorporated (NYSE:TDY) (“Teledyne”) announced today that it has entered into an agreement to acquire select aerospace and defense electronics businesses from Excelitas Technologies Corp. (“Excelitas”) for $710m in cash. The acquisition includes the Optical Systems (OS) business known under the Qioptiq® brand based in Northern Wales, UK, as well as the U.S.-based Advanced Electronic Systems (AES) business.

“Our journey providing electro-optical solutions designed to keep troops and high-value assets safe continues with an industry leader.”

Post this

The UK-based OS business provides advanced optics for heads-up and helmet-mounted displays, dismounted tactical night vision systems and proprietary glass used in space and satellite applications. In the U.S., the AES business provides custom energetics, including electronic safe & arm devices, high-voltage semiconductor switches and rubidium frequency standards for defense and space applications.

“We are excited to announce this pending acquisition, which will bring us new technology in markets well-understood by Teledyne. Our respective products are highly complementary and not competitive, and we generally serve customers in complementary geographies,” said Robert Mehrabian, Executive Chairman. “We look forward to welcoming these businesses and their employees to Teledyne.”

“We will be pleased to add these businesses to our aerospace and defense electronics segment, which has performed exceptionally well in recent years,” said George Bobb, President and Chief Operating Officer. “Furthermore, we believe the businesses’ operations, personnel and culture are very compatible with our U.S. and UK defense electronics organizations.”

“We are excited about the new opportunities this acquisition will bring and look forward to a seamless integration that will benefit our customers, employees and Teledyne stakeholders,” said Doug Benner, EVP Excelitas and President Defense and Aerospace Segment. “Our journey providing electro-optical solutions designed to keep troops and high-value assets safe continues with an industry leader.”

The transaction is anticipated to be completed in early 2025 and is subject to customary closing conditions, including regulatory approvals. Teledyne management expects the transaction to be accretive to GAAP and non-GAAP earnings per share, excluding transaction costs.

Evercore and Harris Williams are acting as financial advisors, and Fried, Frank, Harris, Shriver & Jacobson LLP is acting as legal advisor to Excelitas in connection with the transaction. McGuireWoods LLP is acting as legal advisor to Teledyne.

About Teledyne

Teledyne is a leading provider of sophisticated instrumentation, digital imaging products and software, aerospace and defense electronics, and engineered systems. Teledyne’s operations are primarily located in the United States, Canada, the United Kingdom, and Western and Northern Europe. For more information, visit Teledyne’s website at www.teledyne.com.

About Excelitas

Excelitas is the leading provider of advanced, life-enriching technologies that make a difference, serving global market leaders in the life sciences, advanced industrial, next-generation semiconductor, aerospace, and defense end markets. Headquartered in Pittsburgh, Pennsylvania, Excelitas is an essential partner in the design, development, and manufacture of advanced technologies, offering leading-edge innovation in sensing, detection, imaging, optics, and specialty illumination for customers worldwide. Excelitas is at the forefront of addressing many of the relevant megatrends impacting the world today, including precision medicine, industrial automation, artificial intelligence, connected devices (IoT), and military modernization. (Source: BUSINESS WIRE)

06 Nov 24. HENSOLDT reports revenue growth and significantly higher order intake in third quarter of 2024.

Order intake increases to EUR 1,865m in the first nine months of 2024
Revenue grows by 21.3% to EUR 1,377m
Adjusted EBITDA improves by 24.1% to EUR 187m
Adjusted EBITDA margin increases to 13.6%
Integration of ESG Group largely completed 200 days after closing
Book-to-bill ratio for the 2024 financial year specified at the upper end at around 1.2x
Guidance for the 2024 financial year confirmed

The HENSOLDT Group (“HENSOLDT”) continued its positive business performance in the first nine months of the 2024 financial year. The company was able to further strengthen its position as a leading platform-independent European provider of seamlessly integrated defence solutions. In the first nine months of 2024, order intake increased to EUR 1,856m (previous year: EUR 1,281m). As a result, the order backlog has grown by almost one bn euros year-on-year to EUR 6,513m (previous year: EUR 5,472m euros).

Revenue for the first nine months increased by 21.3% to EUR1,377m (previous year: EUR1,136m). Adjusted EBITDA improved by 24.1% to EUR 187m (previous year: EUR151m). This development was mainly driven by significant revenue growth in the core business as well as the first-time consolidation of the ESG Group. The adjusted EBITDA margin improved to 13.6% (previous year: 13.3%).

Oliver Dörre, CEO of the HENSOLDT Group, says: “The strong first nine months of 2024 underscore the positive development – particularly in the area of operational excellence – as well as the growth potential of HENSOLDT. After just 200 days we have largely completed the post-merger integration of ESG: central functions are fully integrated, and the relevant processes are implemented. This means that there is nothing to stop the full operational integration of ESG being completed at the turn of the year! We consistently expand HENSOLDT’s position as a reliable partner to our customers, both nationally and internationally, and we keep our promises.”

Christian Ladurner, CFO of the HENSOLDT Group, says: “The significant increase in revenues and the rise in adjusted EBITDA underline our operational strength in realizing economies of scale in our core business. We are particularly pleased with the strong order intakes, which once again significantly exceeded the previous year’s period. This success enabled us to specify the guidance of our book-to-bill ratio at the upper end of our expectations. HENSOLDT will continue to consistently pursue this profitable growth trajectory in the future.”

Continued strong development in order intake

With an order intake of EUR 1,865m (previous year: EUR 1,281m) in the first nine months of the current financial year, HENSOLDT was able to exceed the already high level of the previous year by 44.9%.

A key driver of this development was the strong performance of the Sensors segment. The main drivers were orders for the short-range and very short-range air defence system (Luftverteidigungssystem Nah- und Nächstbereichsschutz; LVS NNbS) commissioned for the German Bundeswehr. In addition, orders were received for further TRML-4D radars, firstly in support of Ukraine and secondly for Latvia and Slovenia as part of the European Sky Shield Initiative (ESSI). The segment was able to conclude orders for Spexer radars for the Skyranger air defence system. From the second quarter of 2024, the order intake of the ESG Group amounting to EUR305m was included for the first time within the Sensors segment for six months. The largely integrated ESG Group has been managed as a separate division within the Sensors segment since the second quarter of 2024. The orders already include a successfully signed contract to provide logistics services to the German Bundeswehr (ZEBEL).

HENSOLDT has also been contracted to deliver radar systems for the Space Centre Australia. The contract includes the delivery of two high-performance Air Surveillance Radar – Next Generation systems (ASR-NG), along with a 20-year sustainment plan to bolster Australia’s critical air surveillance capabilities.

At the beginning of October, HENSOLDT entered into an agreement with Deutsche Flugsicherung GmbH (DFS; German air navigation service provider) to enable the use of the Twinvis passive radar for civil air traffic control.

In the Optronics segment, the order intake of EUR297m in the first nine months of the 2024 financial year was slightly below the strong order intake in the same period of the previous year. The first nine months of 2024 included in particular orders related to the Final Focus Metrology (FFM), orders for the laser rangefinder for the M1 Abrams main battle tank and an order related to the LVS NNbS project.

Continued strong development in revenue, earnings and free cash flow

Compared to the previous year, HENSOLDT’s revenues increased by 21.3% to EUR1,377m (previous year: EUR1,136m). Revenues contained significantly less pass-through business (revenue with a low value-added share) than in the first nine months of 2023. A major growth driver was the ESG Group, which has now been largely integrated and contributed EUR172m. At the same time, the core business – adjusted for the business activities of the ESG Group – grew by 10% compared to the prior-year period, particularly due to the TRML-4D radars.

The two major projects PEGASUS (airborne electronic signals intelligence system) and the Eurofighter radars developed as expected. Hence, the first flight of the PEGASUS aircraft in Wichita, USA; at the end of October, marked an important project milestone. With the modernization of the Norwegian ULA class submarines, HENSOLDT reached another milestone. The technical planning and execution were successfully validated in a critical design review in Bergen, Norway.

The adjusted EBITDA increased by 24.1% to EUR187m (previous year: EUR 151m). This development mainly resulted from an increased revenue volume, corresponding economies of scale and the first-time inclusion of the ESG Group. At 13.6%, adjusted EBITDA margin was in line with expectations and on a par with the previous year (13.3%). The adjusted free cash flow of EUR-157m was higher than in the same period of the previous year (EUR 162m).

Outlook for the 2024 financial year confirmed – Book-to-bill ratio specified at upper end

For the 2024 financial year, HENSOLDT expects business to continue to develop positively and confirms its guidance. The Group continues to benefit from the high demand in Germany, Europe and NATO member states, as well as the continuing high international demand for defence solutions. For the current financial year, HENSOLDT expects consolidated revenues of approx. EUR 2.3 bn and a moderate increase in adjusted EBITDA with an adjusted EBITDA margin before revenues with a low value-added share of between 18% and 19%. In view of the high order backlog, HENSOLDT is specifying its forecast for the book-to-bill ratio at the upper end at around 1.2x (previously 1.1x – 1.2x).

07 Nov 24. Rheinmetall presents record figures: Sales are rising by more than a third, earnings increase by more than 70%.

Very dynamic military business: Group sales up in the first nine months by 36% to €6.3bn
Operating result jumps from €410m to €705m by 72%
Operating margin in the Group climbs to 11.3%
Orders increased significantly: Rheinmetall Nomination rose 48% to over €21bn
New record high for order backlog: Rheinmetall Backlog grows significantly to €52bn
Operating free cash flow improves by €527m to €99m
Guidance for 2024 is confirmed

Düsseldorf-based Rheinmetall AG closes the third quarter of 2024 with new record highs both in terms of sales and earnings. The very dynamic market situation in the military business sees continued high demand by the armed forces of Germany and partner nations in the EU and NATO, as well as the ongoing aid for Ukraine. However, the civilian sector of the Group remained slightly below the previous year.

The Group achieved a significant improvement in operating free cash flow with large-volume customer advance payments.

Due to the expected business development in the fourth quarter of 2024, the Group management confirms its sales and earnings guidance for fiscal year 2024 in the Group. Rheinmetall is now aiming for an operating result margin at the upper end of the guidance.

Armin Papperger, CEO of Rheinmetall AG, on the company development: “Rheinmetall is needed, as demonstrated by our numerous successful orders. We are experiencing growth like we have never seen before in the Group. We have entered into pioneering collaborations and have promising projects in many countries – for example in the USA, Great Britain, Italy and Ukraine. We have major orders in our pipeline, which will ensure further growth in sales in the years to come. In addition, we are building new production facilities, expanding our capacities massively and making strategic acquisitions. This will bring us closer to our goal of becoming a global champion in the defence industry.”

Rheinmetall Group: Profitable sales growth of 36% – Rheinmetall Nomination increased by half

After nine months, Group sales increased noticeably by €1,650m or 36% to €6,268m compared to the previous year (previous year: €4,618m). The share of sales generated by the German customer increased by 6 percentage points to 30% in the first three quarters of 2024 compared to the same period of the previous year, while the foreign share was 70%.

As of September 30, 2024, the operating result amounted to €705m up by €295m or 72% compared to €410 m in the previous year. In addition to sales growth, the improvement in the operating result was driven among others by earnings contribution from Rheinmetall Expal Munitions, which was acquired in August 2023 in Spain. By the end of the third quarter of 2024, the Group’s operating margin improved to 11.3% (previous year: 8.9%).

Earnings per share from continuing operations improved compared to the same period of the previous year from €4.88 to €7.32 in the first nine months of the 2024 fiscal year.

The operating free cash flow advanced significantly compared to the previous year by €527m to €99m, after having stood at -€428m in the same period of the previous year. The main driver for the positive development of operating free cash flow is the increase in customer advance payments received. The positive effect is mitigated by the multiple capex projects and the further build-up of inventories for the anticipated sales development in the fourth quarter.

The value of Rheinmetall Nomination increased significantly by 48% compared to the same period of the previous year. It increased in the first nine months to €21.4bn (previous year: €14.5bn). The main reasons for this were among other things, orders from Germany – here primarily from the special fund of the Bundeswehr – and orders to aid Ukraine. Rheinmetall Nomination comprises traditional incoming orders as well as the volume from future call-offs under new framework agreements entered into with military customers and new contracts with civilian clients (nominations).

As a result, the Rheinmetall Backlog increased significantly by 41% from €36.7bn to €51.9bn (September 30, 2024) compared to the previous year. In addition to orders on hand, Rheinmetall Backlog also includes the call-offs expected from framework agreements in place with military customers and the potential from contracts with civilian clients.

Vehicle Systems: Rheinmetall Backlog rises by 37% compared to the previous year

Sales at Vehicle Systems, with activities primarily in the field of military wheeled and tracked vehicles amounted to €2,537m after nine months of the fiscal year of 2024, up €865m or 52% year-on-year. This increase is mainly due to the delivery of pre-produced swap body systems (trucks) and the start of tactical vehicle programs.

Rheinmetall Nomination – the total of order intake and the volume of newly concluded framework agreements with military customers – increased by €1.9bn to around €6.8bn compared to the previous year. The largest orders in 2024 are thus far a new framework agreement to supply UTF category military trucks to the Bundeswehr in the amount of €2.9 bn, the order for the manufacture and supply of the German armed forces’ heavy weapon carrier based on the Boxer wheeled vehicle, with a volume of over €1.6bn, as well as the associated service contract with around €630m.

Rheinmetall Backlog – the total of orders on hand and the call-offs expected from framework agreements in place with military customers – was with €20.6bn as at September 30, 2024, €5.6bn or 37% higher compared to the previous year. The operating result improved from €182m to €281m. With 11.1%, the operating result margin was above the prior year’s margin of 10.9%.

Weapon and Ammunition: Backlog once again increased significantly to around €20bn

Weapon and Ammunition achieved record sales of €1,554m with its weapon systems and ammunition activities in the first nine months of 2024 exceeding the previous year’s sales by €608m or 64%. The increase compared to the same period of the previous year is attributable in particular to higher ammunition deliveries. Key projects included artillery orders for Germany and Ukraine. With sales of €352 m, Rheinmetall Expal Munitions, acquired on July 31, 2023, contributed significantly to this growth.

At €10.2bn, the Rheinmetall Nomination is significantly higher than the previous year’s figure after nine months of the 2024 fiscal year (previous year: €7bn). An essential driver is a framework agreement in the gross amount of €8.5bn for artillery ammunition by the German customer. Further growth was generated in Germany and the countries in West Asia for indirect fire and medium calibre products.

As of September 30, 2024, the Rheinmetall Backlog reached around €20bn. Compared to the previous year’s figure (September 30, 2023: €11.3bn), the increase was more than €8bn or 73%. The drivers for this were the conclusion of two multi-year ammunition framework agreements in the second half of 2023 and the subsequent increase in the artillery framework agreement by the German customer in June 2024.

The operating result almost doubled by the end of the third quarter of 2024 with an increase of €163m or 93% to €339m (previous year: €175 m). This includes an earnings contribution of €117m from Rheinmetall Expal Munitions. Despite higher staff and material, the operating result margin improved significantly from 18.5% to 21.8%.

Electronic Solutions: Rheinmetall Nomination tripled – Air defence as a driving force

Electronic Solutions, with products in the field of armed forces digitalization, infantry equipment, air defence and simulation, increased its sales after nine months of the 2024 fiscal year by €218m to €1,038m (previous year: €820m); this corresponds to an increase of 27%. The sales upswing is essentially the result of an order by the German Bundeswehr for the Skyranger 30 mobile air defence system and the NNBS short range air defence system, additional deliveries for the Puma infantry fighting vehicle and the modernization of an existing air defence system for a European customer.

Compared to the same period of the previous year, Rheinmetall Nomination more than tripled from €1 bn to €3.5bn. A development contract for the short- and very short-range air defence system and a supply contract for the mobile Skyranger 30 air defence system were the key order intakes received by the German customer. Furthermore, the conclusion of a framework agreement for the delivery of communication and hearing protection headsets as well as a portion in the commissioning for the manufacture and supply of the Boxer armoured vehicle as infantry heavy weapons carrier for the German armed forces should be named. The Rheinmetall Backlog was at €6.7bn on September 30, 2024. Therefore, it is significantly higher than the previous year’s figure by almost €3bn (previous year: €3.7bn).

The operating result strengthened by the end of the third quarter of 2024 to €96m, after €56m in the previous year. Due to a favourable product mix, the operating margin increased to 9.2% (previous year: 6.9%).

Power Systems: Sales slightly below the previous year, backlog still at a high level

At €1,543m, sales at Power Systems, which bundles technological expertise in civilian markets, are slightly below the previous year’s figure in the period under review (previous year: €1,551m). After the past nine months of the 2024 fiscal year, the booked business was slightly

below the previous year at €2.1bn (previous year: €2.4bn). The nominated backlog as of September 30, 2024 fell by 9.2% to €8.1bn (previous year: EUR 8.9bn).

The operating result fell by 4% to €74m compared to the previous year (previous year: €77m). The operating margin dropped slightly to 4.8% (previous year: 5%).

Outlook: Current guidance for 2024 confirmed

Rheinmetall confirms its sales and earnings guidance for full year 2024 after the first nine months of fiscal year 2024 based on the expected business performance in the fourth quarter. Including acquisitions in the current fiscal year 2024 – including holding costs – the Group expects to achieve group revenue of around €10 bn. The Group now expects the operating margin to be around 15%, at the upper end of the guidance (2023: 12.8%).

04 Nov 24. V2X Reports Strong Third Quarter Results with Record Revenue, Net Income, and Adjusted EBITDA.

Third Quarter Highlights

Record revenue of $1.08 bn, up 8% y/y
Indo-Pacific revenue growth of 31% y/y driven by increased demand
Operating income of $49.9 m; Adjusted operating income1 of $76.9m
Record net income of $15.1m, up $21.5m y/y; Adjusted net income1 of $41.3m, up 76% y/y
Record adjusted EBITDA1 of $82.7m, up 28% y/y with a margin of 7.6%
Diluted EPS of $0.47; Adjusted diluted EPS1 of $1.29, up 77% y/y

2024 Guidance:

Raising full-year revenue and adjusted EPS1 guidance midpoint and reaffirming adjusted EBITDA and operating cash flow1

V2X, Inc. (NYSE:VVX) announced third quarter 2024 financial results.

“V2X reported strong third quarter results with record revenue, net income, and adjusted EBITDA1, driven by our continued alignment to well-funded critical missions and the ability to deliver capabilities at scale across the globe,” said Jeremy Wensinger, President and Chief Executive Officer of V2X. “Revenue increased 8% year-over-year and adjusted EBITDA1 increased 28% year-over-year, reflecting strong program performance. Adjusted net income1 increased 76% year-over-year and adjusted diluted EPS1 increased 77% year-over-year.”

Mr. Wensinger continued, “During the third quarter we demonstrated continued growth in the Indo-Pacific region with revenue increasing 31% year-over-year. This performance was tied to the DoD’s continued focus on enhancing U.S. readiness in the region. We are seeing additional opportunities for growth in the region that align to improving the capacity and capabilities of U.S. allies and our partners.”

“Our full spectrum capabilities across the mission lifecycle serve as a differentiator. The fact that we are with our customers across the globe at every phase of mission execution, gives us prodigious knowledge, allowing us to deliver best of breed cost effective solutions that are enhancing outcomes. This unique position is yielding results with V2X securing approximately $5bn of awards in the third quarter. This includes the $3.7bn Warfighter-Training Readiness Solutions (W-TRS) award that represents a milestone win for V2X. We delivered a technology enabled solution that was compelling and will ensure every Army soldier has the tools necessary to conduct accurate training preparing them for whenever called upon to deploy. These wins validate our strong positioning in the marketplace and are expected to contribute to our financial performance for years to come.”

Mr. Wensinger concluded, “I believe there is additional opportunity to build on our momentum through further optimization of our business. This includes enhancing the breadth and depth of our pipeline as a result of the collective capabilities. W-TRS is a great example of a solution that leveraged the collective capabilities. We are building on that success to expand our addressable markets in all areas of the company. We are investing in this expanded pipeline to ensure we address opportunities with talent and solutions that will differentiate V2X offerings.”

Third Quarter 2024 Results

“V2X reported record revenue of $1.08bn in the quarter, which represents 8% year-over-year growth,” said Shawn Mural, Senior Vice President and Chief Financial Officer. “We continued to deliver double digit revenue growth in the Indo-Pacific (31% year-over-year) and Middle East (13% year-over-year) regions, which was achieved through continued expansion of existing business as well as new programs.

“For the quarter, the Company reported operating income of $49.9m and adjusted operating income1 of $76.9m. V2X delivered record adjusted EBITDA1, increasing 28% year-over-year to $82.7m, with a margin of 7.6%, reflecting our expected second half program performance. Third quarter GAAP diluted EPS was $0.47. Adjusted diluted EPS1 for the quarter increased 77% year-over-year to $1.29.”

“Third quarter net cash provided by operating activities was $62.7 m. Adjusted net cash provided by operating activities1 increased 35% year-over-year to $130.1 m. On a year-to-date basis, net cash provided by operating activities was $31.1m. Adjusted net cash used by operating activities1 was $7.2m.”

“At the end of the quarter, net debt for V2X was $1,089m. Net leverage ratio1 was 3.27x, improving 0.29x sequentially. We continue to demonstrate progress on debt paydown and remain on track to be at or below a net leverage ratio of 3.0x, by the end of 2024.”

“Total backlog as of September 27, 2024, was $12.2bn. Funded backlog was $3.0bn. Book-to-bill in the quarter was approximately 1.0x. Backlog does not include the full contract value associated with recent awards.”

2024 Guidance

Mr. Mural concluded, “Given our strong performance through the first nine-months of the year we are updating our total year guidance.” (Source: PR Newswire)

04 Nov 24. Palantir Reports Revenue Growth of 30% Y/Y, U.S. Revenue Growth of 44% Y/Y, GAAP EPS of $0.06; Raises Full Year Guidance on Revenue, U.S. Comm Revenue, Adj. Free Cash Flow, Adj. Op. Income Above Consensus Estimates on “AI Demand that Won’t Slow Down”

Palantir Technologies Inc. (NYSE:PLTR) today announced financial results for the third quarter ended September 30, 2024.

“We absolutely eviscerated this quarter, driven by unrelenting AI demand that won’t slow down. This is a U.S.-driven AI revolution that has taken full hold. The world will be divided between AI haves and have-nots. At Palantir, we plan to power the winners,” said Alexander C. Karp, Co-Founder and Chief Executive Officer of Palantir Technologies Inc.

Q3 2024 Highlights

U.S. revenue grew 44% year-over-year and 14% quarter-over-quarter to $499m

o U.S. commercial revenue grew 54% year-over-year and 13% quarter-over-quarter to $179m

o U.S. government revenue grew 40% year-over-year and 15% quarter-over-quarter to $320m

Revenue grew 30% year-over-year and 7% quarter-over-quarter to $726m
Closed 104 deals over $1m
Customer count grew 39% year-over-year and 6% quarter-over-quarter
GAAP net income of $144m, representing a 20% margin
GAAP income from operations of $113m, representing a 16% margin
Adjusted income from operations of $276m, representing a 38% margin
Rule of 40 score of 68%
GAAP earnings per share (“EPS”) grew 100% year-over-year to $0.06
Adjusted EPS grew 43% year-over-year to $0.10
Cash, cash equivalents, and short-term U.S. Treasury securities of $4.6bn
Cash from operations of $420m, representing a 58% margin and $995 m on a trailing twelve month basis
Adjusted free cash flow of $435m, representing a 60% margin and over $1bn on a trailing twelve month basis

Outlook

For Q4 2024, we expect:

Revenue of between $767 – $771m.
Adjusted income from operations of between $298 – $302m.

For full year 2024:

We are raising our revenue guidance to between $2.805 – $2.809bn.
We are raising our U.S. commercial revenue guidance to in excess of $687 m, representing a growth rate of at least 50%.
We are raising our adjusted income from operations guidance to between $1.054 – $1.058bn.
We are raising our adjusted free cash flow guidance to in excess of $1bn.
And we continue to expect GAAP operating income and net income in each quarter of this year. (Source: BUSINESS WIRE)

04 Nov 24. BWXT to Acquire L3Harris’ A.O.T. Business to Expand Special Materials Portfolio. BWX Technologies, Inc. (NYSE: BWXT) and L3Harris Technologies, Inc. (NYSE: LHX) today announced the signing of a purchase agreement for BWXT to acquire L3Harris’ Aerojet Ordnance Tennessee, Inc. (A.O.T.) business for approximately $100m.

“With decades of experience in specialized materials and metallurgy, A.O.T. brings exciting resources and expertise to BWXT,” said Rex Geveden, president and chief executive officer of BWXT. “This acquisition marks a significant step in our growth strategy, allowing us to leverage A.O.T.’s unique competencies and assets to better serve our customers. The combination of technical expertise and talent at this dynamic organization makes us confident that this acquisition will create greater opportunities for our company and will further enhance our value to BWXT’s customers.”

“This transaction reflects L3Harris’ multi-year strategy to optimize our portfolio and deliver on our commitments to customers and shareholders,” said Ken Bedingfield, chief financial officer, L3Harris.

L3Harris’ A.O.T. business has generated revenue of approximately $40m over the trailing-twelve-month period. It is the sole provider of depleted uranium to the U.S. government and produces other specialized materials, including tungsten, molybdenum, tantalum, rhenium, titanium, nickel, aluminum, copper, metal-matrix composites, metal polymer composites, reactive materials and custom alloys. The acquisition is targeted to close by year-end and is expected to be slightly accretive to BWXT’s earnings, excluding purchase accounting and other one-time costs, within 12-18 months. The acquired business will operate within BWXT’s government operations segment.

The transaction is subject to required approvals and clearances and other customary closing conditions. (Source: BUSINESS WIRE)

04 Nov 24. BWX Technologies Reports Third Quarter 2024 Results.

3Q24 revenues of $672.0m
3Q24 net income of $69.6m, adjusted EBITDA(1) of $127.0m
3Q24 diluted GAAP EPS of $0.76, non-GAAP(1) EPS of $0.83
Expanding special materials portfolio with announced acquisition of A.O.T., a sole source provider of depleted uranium and finished specialty metals for mission critical defense applications; targeting close by year-end
2024 non-GAAP EPS(1) guidance raised to ~$3.20
Preliminary 2025 guidance for revenue, non-GAAP EPS(1) and adjusted EBITDA(1) to grow mid-to-high-single-digits; free cash flow(1) growth to be sustained at 10% or higher

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

“Our strong third quarter performance underscores the momentum BWXT has built throughout 2024,” said Rex D. Geveden, president and chief executive officer. “The combination of recent key contract wins enabled by focused business development efforts, and quarterly and year-to-date double-digit revenue and earnings growth highlight our strategic and operational strengths.”

“The nuclear industry is enjoying unprecedented customer and market interest with tangible investments in nuclear solutions by end-users across our key defense, commercial power, and medical markets,” continued Geveden. “As demand from BWXT’s customers accelerates, we remain focused on operational excellence and investment in our world-class workforce and infrastructure to sustain our unique position in the nuclear value chain.”

“Given our year-to-date results and visibility into the remainder of the year, we now expect 2024 non-GAAP EPS to be at the high-end of the previous guidance range. Looking into 2025, we expect modest organic growth in our Government Operations segment complemented by a slight contribution from the A.O.T. acquisition we announced today, and robust double-digit organic growth in Commercial Operations in both commercial power and medical. The foregoing combined with our ongoing focus on operational excellence, lead us to forecast mid-to-high-single-digit revenue, EBITDA and Earnings Per Share growth in 2025, with improving free cash flow conversion.”

Revenues

Third quarter revenue increased in both operating segments. The Government Operations increase was driven by higher naval nuclear component production and microreactors, partially offset by slightly lower special materials processing. The Commercial Operations increase was driven by higher revenue associated with commercial nuclear components and fuel as well as higher medical sales.

Operating Income and Adjusted EBITDA(1)

Third quarter operating income increased, driven by higher operating income in Government Operations and lower corporate expense that was partially offset by lower operating income in Commercial Operations. The Government Operations increase was driven by higher revenue and solid operational performance. The Commercial Operations decrease was mainly due to a shift in product and services mix and other non-recurring expenses.

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

EPS

Third quarter GAAP EPS increased due to higher operating income and lower interest expense, which were partially offset by slightly lower other income and a modestly higher tax rate. Non-GAAP EPS(1) increased driven by the items noted above. (Source: BUSINESS WIRE)

04 Nov 24. Trident Maritime Systems Announces Strategic Divestiture of Hoffman Engineering. Trident Maritime Systems (“Trident”), a leading maritime systems and solutions provider and portfolio company of investment affiliates of J.F. Lehman & Company (“JFLCO”), announced the divestiture of Hoffman Engineering (“Hoffman”) to Branford Castle Partners, a North American-focused private equity firm. Hoffman is a premier provider of situational awareness solutions, including LED lighting products and night vision imaging systems for mission-critical aerospace, defense and commercial applications. Hoffman has forged a deep technical heritage and reputation for excellence in the lighting and night vision sectors since its inception in 1955.

Tom Eccles, Chief Executive Officer of Trident, commented, “We thank the Hoffman team for all their efforts and are excited to see Hoffman build on its current trajectory under new ownership. This decision to divest Hoffman enables Trident to streamline our solution offerings and focus on driving continued growth in our core maritime end markets.”

Hoffman CEO, Ron Hayward, commented, “We are extremely grateful for the support of our previous owner, Trident, and look forward to continuing to deliver on future growth opportunities with our new partners at Branford Castle Partners.”

Headquartered in Arlington, VA, Trident is a systems and solutions provider to government and commercial shipbuilders and ship operators across the globe with a comprehensive suite of complex, integrated maritime systems and service offerings. The company maintains operating locations strategically positioned near major naval and commercial shipbuilders across the U.S. and internationally.

Philpott Ball & Werner, LLC served as financial advisor to Trident on the transaction, and Blank Rome provided legal counsel. Branford Castle was advised by its legal counsel, Akerman LLP, and RSM served as its accounting/tax advisor.

02 Nov 24. South Korean defence firms report strong Q3 earnings. South Korea’s major defence firms have posted robust revenues and profits for the third quarter, led by massive arms export deals, industry data showed on Sunday.

The combined operating profits of four major South Korean defence firms — Hanwha Aerospace Co., Korea Aerospace Industries (KAI), Hyundai Rotem Co. and LIG Nex1 Co. — were estimated at 753.8 bn won ($546 m) for the July-September period, according to the data from regulatory filings and financial reports.

The figure more than trebled from 233.3 bn won recorded in the same period last year. Their combined revenues totalled an estimated 5.4trn won, up 30.9 percent on-year from 4.1trn won, reports Yonhap news agency.

Industry leader Hanwha Aerospace posted 477.2bn won in operating profit for the third quarter, up sharply from 85.6bn won a year ago. Its sales soared 61.9 percent on-year to 2.6trn won.

The strong bottom line is attributable to its exports of K9 howitzers and Chunmoo rocket launchers to Poland.

The company secured a deal, valued at 8.2trn won, to supply Poland with hundreds of K9 howitzers and Chunmoo rocket launchers in 2022. This was followed by another contract last year, worth 5.6trn won.

It has an order backlog of nearly 30trn won.

Hanwha Aerospace expected strong results to continue in the coming quarters thanks to new contracts including one with Romania worth 1.3 trillion won.

Hyundai Rotem reported 1.1trn won in sales for the third quarter, up 18 percent from a year ago, while its operating profit more than tripled to 137.5bn won.

The robust performance came as the company clinched a deal to export 1,000 K2 main battle tanks to Poland two years ago.

Its order backlog came to 19trn won.

KAI’s third-quarter sales fell 9.9 percent on-year to 907.2bn won, but its operating profit rose 16.7 percent to 76.3bn won.

Several successful arms deal, including the planned supply of the FA-50PL light fighters to Poland and the FA-50M light combat aircraft to Malaysia, contributed to the company’s solid earnings.

KAI’s order backlog reached 22.4trn won.

LIG Nex1 is forecast to see its sales jump 35.9 percent on-year to 728.3 bn won and its operating profit soar 52.8 percent to 62.8 bn won, with an order backlog of 19trn won. (Source: Google/https://www.socialnews.xyz/)

04 Nov 24. Synetics keeps on delivering.

£2.2m additional contract wins with National Grid
EPS set to double over three-year forecast period
Cash-adjusted ratio set to fall to 9.5 within 12 months

Sheffield-based Synectics (SNX:265p), a leader in advanced security and surveillance systems to customers operating in technically and logistically demanding environments, has won further contracts with National Grid to protect its critical infrastructure across 12 sites.

In January 2024, the energy group awarded Synectics £4mn of additional contracts to deliver security improvement work across 13 new sites. The latest contract win means that Synectics’ technology is now deployed across 32 sites throughout National Grid’s estate. The company has a 30 November financial year-end, so the contract awards help underpin house broker Shore Capital’s expectations for the 2024-25 financial year, when analysts expect annual revenue to increase by 8 per cent to £60m.

Furthermore, as I noted when I rated the shares a buy, at 233p, at the interim results (‘Another upgrade for this cash-generative tech stock’, 16 September 2024), order intake is underpinned by a raft of contracts for the installation of security and surveillance systems at casino resorts in Asia and further contract wins with oil and gas giant Saudi Aramco. Synectics has deployed more than 10,000 specialist COEX camera stations to safeguard oil and gas refineries, pipelines, offshore vessels, and platforms for industry giants including Saudi Aramco and Shell. The gaming and global oil and gas market account for a fifth and a quarter of annual revenue, respectively.

Accelerated earnings growth

It’s worth noting, too, that a leaner cost base following a restructuring programme, the natural operational leverage of the business and a tailwind from the recovering oil and gas market mean that the operating margin will expand in a positive revenue cycle. In fact, analysts expect pre-tax profit and earning per share (EPS) to increase by 28 per cent to £5mn and 23.9p, respectively, in the new financial year, or more than three times the growth rate of revenue. On this basis, the shares are trading on a modest forward price/earnings (PE) ratio of 11.

In addition, the business is highly cash generative, so much so that Shore Capital forecasts a doubling of annual free cash flow (FCF) to £4.8m (27p), which underpins a bumper FCF yield of 10.3 per cent. It means that even if the board hike the dividend per share by 44 per cent to 6.5p at a cost of £1.2m, as analysts predict, net cash will continue to build. Indeed, the house broker pencils in a near-50 per cent increase to £7m (39p) in closing net cash in the 12 months to 30 November 2025, rising to £9.3m (52p) a year later. On this basis, the cash-adjusted PE ratio could drop to 9.5 by this time next year, falling to 7.3 in November 2026.

That’s a modest rating for a company targeting end markets with high barriers to entry and in sectors that are often challenging to penetrate. For instance, Synectics’ proprietary security and surveillance software manages and records more than 250,000 channels across 270 locations worldwide, including high-security environments such as town and city centres, stadiums, tourist attractions and critical infrastructure sites.

Synectics’ share price hit a seven-year high of 299p earlier this month after I suggested buying the shares in the summer, at 188p Buy. (Source: Investors Chronicle)

01 Nov 24. Moog Inc. Reports Strong Performance for Fourth Quarter 2024 and Issues Positive Guidance for Fiscal 2025 Moog Inc. (NYSE: MOG.A and MOG.B), a worldwide designer, manufacturer and systems integrator of high-performance precision motion and fluid controls and control systems, today reported strong fiscal fourth quarter 2024 results that marked another record year.

“Our performance reflects the success in pricing and simplification initiatives that continue to build momentum into 2025, with stronger sales, expanded margin and improved cash flow generation.”

Post this

“Our fourth quarter was strong, bringing to a close an exceptional year with record sales and expanded margins,” said Pat Roche, CEO. “Our performance reflects the success in pricing and simplification initiatives that continue to build momentum into 2025, with stronger sales, expanded margin and improved cash flow generation.”

Quarter Highlights

Net sales increased driven by growth in defense businesses.
Operating margin declined due to higher levels of charges related to simplification initiatives.
Adjusted operating margin improved within Military Aircraft, Industrial and Space and Defense, while Commercial Aircraft declined from a strong quarter a year ago.
Diluted net earnings per share increased due to improved operational performance, partially offset by the net of prior and current year one-time charges and benefits.
Adjusted diluted net earnings per share increased due to incremental profit from higher sales and the benefit of capitalizing interest, partially offset by the absence of last year’s favorable litigation settlement.
Twelve-month backlog increased 3%, reaching a record level of $2.5 bn.

Year Highlights

Net sales increased due to higher demand across our aerospace and defense businesses.
Operating margin increased within Space and Defense and Military Aircraft, while Industrial and Commercial Aircraft declined.
Adjusted operating margin expanded in Military Aircraft, Space and Defense and Industrial reflecting the benefits of pricing and simplification initiatives, while Commercial Aircraft declined from a strong prior year.
Diluted net earnings per share increased due to largely the same factors as the fourth quarter.
Adjusted diluted net earnings per share increased driven by operating margin expansion and incremental profit from higher sales.

Quarter Results

“We had a great quarter,” said Jennifer Walter, CFO. “Sales were very strong, adjusted operating margin was robust and on plan, and adjusted earnings per share exceeded the high end of our guidance range. In addition, we generated a substantial amount of free cash flow.”

Sales in the fourth quarter of 2024 increased compared to the fourth quarter of 2023, with notable growth in Military Aircraft and Space and Defense. Military Aircraft sales increased 17% to $216m due to the ramp of the FLRAA and other production programs. Space and Defense sales increased 9% to $263 m driven by strong European defense demand and launch vehicle activity. Commercial Aircraft sales increased 2% to $197 m due to increased production volume, muted by the absence of last year’s retroactive pricing benefit and inventory sale from exiting a mature product line. Industrial segment sales decreased 5% to $242 m due to a slowdown in orders for industrial automation applications, partially offset by higher medical product and automotive test business demand.

Operating margin decreased 100 basis points to 9.1% in the fourth quarter of 2024 compared to the fourth quarter of 2023. Commercial Aircraft operating margin declined 680 basis points to 11.0%, driven by the absence of last year’s benefits. Operating margins in Space and Defense and in Industrial declined 200 basis points and 130 basis points, respectively, due to incremental charges related to simplification initiatives. Military Aircraft operating margin improved 590 basis points to 11.8%, driven by reduced research and development expense, improved sales mix and cost absorption on the FLRAA program.

Adjusted operating margin in the fourth quarter of 2024 was unchanged at 12.5% compared to the fourth quarter of 2023. We incurred charges primarily in Industrial and in Space and Defense. Adjusted operating margin in Industrial increased 90 basis points to 12.8% as the benefits of pricing more than offset an unfavorable sales mix and planned product transfers. Adjusted operating margin in Space and Defense increased 70 basis points to 13.5% associated with improved performance across the business.

Non-operating expenses in the fourth quarter of 2024 declined compared to the fourth quarter of 2023. The fourth quarter of 2024 included a $10 m adjustment to capitalize interest for 2023 and 2024. Non-operating expenses in the fourth quarter of 2023 included a pension settlement charge and a favorable litigation settlement.

Free cash flow in the fourth quarter was driven by strong customer collections and by timing of vendor payments.

Year Results

Sales in 2024 increased compared to 2023 with notable growth in Commercial Aircraft, Military Aircraft and Space and Defense. Commercial Aircraft sales increased 18% to $788m due to increased production ramps on widebody, narrowbody and business jet programs. Military Aircraft sales increased 13% to $812m due largely to having a full year’s worth FLRAA sales. Space and Defense sales increased 7% to $1bn due to strong, broad-based, defense demand. Industrial sales increased slightly at 1% to $991m, as softening industrial automation sales were compensated by growth in other sub-markets.

Operating margin in 2024 increased compared to 2023, reflecting the benefits of pricing and simplification efforts, partially offset by higher amounts of charges related to simplifying our operations. Operating margin increased in Space and Defense and Military Aircraft, while Commercial Aircraft operating margin decreased, all due to the same factors as the fourth quarter. Also, Industrial operating margin decreased due to higher amounts of simplification charges.

Adjusted operating margin increased in 2024 compared to 2023, inclusive of a 40 basis-point contribution from the Employee Retention Credit, and increased in all of our segments except for Commercial Aircraft. Adjusted operating margin in Military Aircraft increased 300 basis points to 12.0% due to cost absorption on the FLRAA program and due to lower research and development expense. Adjusted operating margin in Space and Defense increased 290 basis points to 13.4% due to strong operational performance, including improved performance on space vehicle programs. Adjusted operating margin in Industrial increased 90 basis points to 12.4% due largely to pricing initiatives. Adjusted operating margin in Commercial Aircraft decreased 90 basis points to 11.8% due to the absence of the prior year’s one-time benefits, partially offset by efficiencies from the current year’s higher production sales volume. (Source: BUSINESS WIRE)

01 Nov 24. UK: Alleged defence firm divestment will highly likely embolden radical pro-Palestinian activists. On 31 October, the radical pro-Palestinian activist group Palestine Action (PA) claimed that the multinational bank Barclays had divested from the Israeli defence company Elbit Systems as a result of PA activism. PA has repeatedly vandalised high street branches of Barclays over the past year, once targeting 20 sites in a single day. If the divestment has taken place (we cannot confirm this), it will be regarded as a major success for PA and will highly likely incentivise the group to continue conducting highly disruptive protests against other targets. The group has the capability and intent to target any UK-based company that is part of Elbit Systems’ supply chain. Although there are PA offshoots in countries such as France and Italy, the UK group is by far the most disruptive. We assess that PA will almost certainly continue to prosecute its campaign at least as long as the Israel-Hamas war persists, driving activism risks to any company with links to Elbit Systems. (Source: Sibylline)

01 Nov 24. Denel annual financial statements expected by end-November. Denel has added a rotary-wing UAV to its product line-up.

The demise of government’s Department of Public Enterprises (DPE) saw Denel, along with other State-owned enterprises (SOEs), moved to “line function ministries”.

This meant Defence and Military Veterans Minister Angie Motshekga, in terms of an August Presidential proclamation, is now tasked with the “administration, powers and functions entrusted by specific legislation” for Denel from the defunct DPE.

Viewing this development dispassionately in the light of the still coming State Asset Management Company (SAMC), which will oversee SOEs previously the responsibility of the DPE, is Democratic Alliance (DA) defence and military veterans spokesman Chris Hattingh.

“As it stands now Denel is an SOE reporting to Motshekga. If logic is applied it means the Parliamentary oversight function for Denel resorts under the Portfolio Committee on Defence and Military Veterans (PCDMV). If this status quo is retained or will change will depend entirely on the legislation relating to the yet-to-be constituted SAMC he told defenceWeb adding “it’s clear Denel has to be subjected to vigorous oversight”.

Hattingh will keep a close eye on SAMC developments, including publication – for comment – of a draft bill.

“Whether the SAMC and its as yet unknown mechanisms will provide for this level of oversight remains to be seen,” he said, pointing to the past where “many years of oversight did not prevent many SOEs, including Denel, becoming the mess they are”.

Hattingh further told this publication the PCDMV was informed by the Auditor-General (AG) Denel’s audit for the 2023/24 financial year was outstanding due to non-submission of annual financial statements for the same period. The “anticipated” submission date for the Denel 2023/24 annual financial statements is 30 November, the committee heard.

In April this year the Companies Tribunal, an agency of the Department of Trade, Industry and Competition (DTIC), reprieved the defence and technology conglomerate for not “timeously” holding annual general meeting (AGMs), where annual reports and financial statements are tabled. The reprieve was reported by Johannesburg-based financial daily Business Day, which noted the Centurion-headquartered SOE last held an AGM in January 2021. The Companies Tribunal has it, in terms of the Companies Act, that AGMs must be held annually and no more than 15 months after the date of the previous AGM.

Business Day reported the SOE had finalised its financials “but the AG was unable to conclude the audits within the stipulated time”. This “forced” Denel to request further extensions for the 2021, 2022 and 2023 financial years by no later than the end of May this year. The request was granted by the Companies Tribunal, the paper reported.

(Source: https://www.defenceweb.co.za/)

31 Oct 24. HII slashes financial outlook for 2024 due to contract delays, supply chain issues.

In a note to investors, J.P. Morgan analyst Seth Seifman said the Supply chain problems, COVID-era contract terms and lagging contract negotiations with the Navy hampered shipbuilding giant HII during the third quarter, forcing the company to lower its financial guidance for the year, the company announced today.

Free cash flow for the year is now expected to top out at $100m, a drastic reduction from a previous estimate of between $600m and $700m. HII also withdrew its five-year cash flow outlook, which spanned from 2024 to 2028. Shares of the company plummeted 23 percent today as the company failed to meet Wall Street expectations.

“The long-term value equation for HII has not changed. There’s unprecedented demand for our products and services,” CEO Chris Kastner told investors during an earnings call. “We remain confident in our mid- to long-term guidance of nine to 10 percent shipbuilding margins, and we firmly believe the actions we are taking will enable us to stabilize performance as we continue to work through these shifts.”

The company’s Newport News Shipbuilding division — which builds aircraft carriers and submarines — took a total $78 m in charges, including $34 m related to design changes for Block IV Virginia-class submarines, with the rest of the impact spread between two Ford-class carriers and the refueling and overhaul of the John C. Stennis (CVN-74), said Chief Financial Officer Tom Stiehle.

Executives broke down the company’s challenges into two buckets. First, it is unclear whether HII will wrap up contract negotiations with the Navy for 17 Virginia-class Block V and Block VI and Columbia-class submarines by the end of the year, which could alter the company’s profitability and cash flow for the year and beyond.

Second, HII’s shipyards have underperformed due to late deliveries from its supply chain and a lowered experience level among its own workforce, which has led to greater than expected rework.

“It bears repeating that nearly all of the ships currently under construction were negotiated prior to COVID, and since those contracts were signed, we have seen a significant loss of shipbuilding experience in our yards,” Kastner said in a statement accompanying the results.”Those ship contracts, which we are still operating under at Newport News, did not anticipate in their cost targets and risk limiting clauses the significant disruption of our workforce and supply chain, or extended periods of heightened cost inflation.”

On the ongoing negotiations with the Navy, Kastner said the discussions were a chance to “reset” contract terms to reflect those post-COVID realities.

“We’ve been working very hard with the customer to try to get those 17 ships right. It’s a broad-based sort of contract that we’re working on that really unlocks investment in in labor and infrastructure and technology across the portfolio,” he said. “We thought we were pretty close to getting it done. It’s in review still, and alternatives are being reviewed, and we’re supporting that conversation, but it’s just created some unpredictability.” (Source: Google/Breaking Defense.com)

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For more information visit www.tcibr.com and www.enterprisecontrol.co.uk

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