CoreCivic, Inc. (CXW) Post Call Commentary and Updated Projections
CoreCivic is a diversified, government-solutions company with the scale and experience needed to solve tough government challenges in flexible, cost-effective ways. We provide a broad range of solutions to government partners that serve the public good through high-quality corrections and detention management, a network of residential and non-residential alternatives to incarceration to help address America’s recidivism crisis, and government real estate solutions. We are the nation’s largest owner of partnership correctional, detention and residential reentry facilities, and believe we are the largest private owner of real estate used by government agencies in the United States. We have been a flexible and dependable partner for government for nearly 40 years. Our employees are driven by a deep sense of service, high standards of professionalism and a responsibility to help government better the public good. Learn more at www.corecivic.com.
Joe Gomes, Senior Research Analyst, Noble Capital Markets, Inc.
Joshua Zoepfel, Research Associate, Noble Capital Markets, Inc.
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Behind the Miss. There were a number of items with the most significant being the La Palma transition, both the cost of implementing the transition as well as a faster drawn down of the existing ICE population than was anticipated, a challenging labor market where CoreCivic has implemented above average wage increases, and the impact of contract non-renewals and asset dispositions.
Upside Potential Remains. Due to the COVID regulations, CoreCivic’s occupancy levels remain well below historical norms. A return to pre-COVID occupancy levels, or about an additional 8,000 detainees, could add some $40-$50 million to EBITDA. Given the expectations for a border surge once Title 42 is lifted, we do not think this is a stretch….
This Company Sponsored Research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).
*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary. Proper due diligence is required before making any investment decision.
Cypress Development (CYDVF) Drill Results Highlight Opportunity for an Extended Shallow Pit Design
Mark Reichman, Senior Research Analyst, Natural Resources, Noble Capital Markets, Inc.
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Sonic drill program. Cypress Development reported results from its sonic drill program intended to obtain material for metallurgical testing at the company’s lithium extraction pilot plant and to supplement the project’s resource model for the feasibility study that is expected to be completed by year-end. Eight holes were drilled representing a total of 580 meters with depths ranging from 61 to 76 meters. Four holes were drilled in the central part of the Clayton Valley property near the planned location of a starter-pit, while four holes were drilled in the northeast portion of the project on and near a parcel of property acquired in May from Enertopia Corporation.
Results validated the company’s resource model. The assay results were in line with lithium grades predicted at all eight locations by the company’s resource block model. The compiled average lithium grade from all eight holes were 1,080 parts per million lithium compared to 1,060 parts per million predicted by the company’s current resource model for all eight locations….
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Genco Shipping (GNK) Results rise even as the company takes steps to position itself for the future
Genco Shipping & Trading Limited, incorporated on September 27, 2004, transports iron ore, coal, grain, steel products and other drybulk cargoes along shipping routes through the ownership and operation of drybulk carrier vessels. The Company is engaged in the ocean transportation of drybulk cargoes around the world through the ownership and operation of drybulk carrier vessels. As of December 31, 2016, its fleet consisted of 61 drybulk carriers, including 13 Capesize, six Panamax, four Ultramax, 21 Supramax, two Handymax and 15 Handysize drybulk carriers, with an aggregate carrying capacity of approximately 4,735,000 deadweight tons (dwt). Of the vessels in its fleet, 15 are on spot market-related time charters, and 27 are on fixed-rate time charter contracts. As of December 31, 2016, additionally, 19 of the vessels in its fleet were operating in vessel pools.
Michael Heim, CFA, Senior Research Analyst, Noble Capital Markets, Inc.
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Genco Shipping reported 2022-2Q results above our estimates but below consensus estimates. Net revenues were $100.9 million vs. $76.0 million last year, above our $97.1 million estimate but below the consensus estimate of $109.1 million. Adjusted EBITDA for the quarter was $64.2 million, up 28% but below our estimate of $67.1 million and the consensus estimate of $67.4 million. Net income was $47.5 million ($1.10 per share) vs. our estimate of $43.6 million ($1.01 per share) and the consensus estimate of $50.5 million ($1.17 per share).
Why were costs up? Daily vessel operating expenses were $7.358/day in the second quarter versus $5,151/day last year. The company is switching technical management companies. The changeover required higher repair and maintenance costs and an increase in the purchase of stores and spare parts. In addition, the company completed an entire crew changeover as ships came into dock. The good news is that the changeover is largely complete and vessel operating expenses are expected to drop to $4,950 in the upcoming quarter….
This Research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).
*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary. Proper due diligence is required before making any investment decision.
Lee Enterprises (LEE) Its Three Pillar Strategy Is Working
Lee Enterprises, Incorporated provides local news, information, and advertising primarily in midsize markets in the United States. It publishes 49 daily newspapers, as well as offers 300 weekly newspapers and specialty publications in 23 states. The company also provides online advertising and services; and online infrastructure and online publishing services for approximately 1,500 daily and weekly newspapers and shoppers. In addition, it offers commercial printing services. The company has a strategic alliance with Yahoo!, Inc. to provide its classified employment advertising customer base the opportunity to post job listings and other employment products on Yahoo!s HotJobs national platform. Lee Enterprises, Incorporated was founded in 1890 and is based in Davenport, Iowa.
Michael Kupinski, Director of Research, Noble Capital Markets, Inc.
Patrick McCann, Research Associate, Noble Capital Markets, Inc.
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Strong fiscal Q3. Q3 revenue was $195 million, 1.7% above our forecast of $191.7 million. Adj. EBITDA of $23 million was in line with our forecast. The revenue beat was driven by strong 27% growth of Digital revenue, which now accounts for 32% of total revenues.
Digital ahead of schedule. Digital revenue growth was driven by Digital-only subscription revenue, up 50%, and Digital Ad & Marketing Services revenue, up nearly 27%. Notably, Digital only subscribers were up 49% to 501,000, achieving the year-end subscriber goal of 495,000 a full quarter early. We believe the most recent quarter demonstrates an industry-leading Digital transformation strategy, which capitalizes on Lee’s local market focus.
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*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary. Proper due diligence is required before making any investment decision.
Salem Media Group (SALM) 2000 Mules Boost Quarterly Results
Salem Media Group is America’s leading multimedia company specializing in Christian and conservative content, with media properties comprising radio, digital media and book and newsletter publishing. Each day Salem serves a loyal and dedicated audience of listeners and readers numbering in the millions nationally. With its unique programming focus, Salem provides compelling content, fresh commentary and relevant information from some of the most respected figures across the Christian and conservative media landscape.
Michael Kupinski, Director of Research, Noble Capital Markets, Inc.
Patrick McCann, Research Associate, Noble Capital Markets, Inc.
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Overachieves Q2 estimates. While total company revenues of $68.7 million were in line with our $68.8 million estimate, adj. EBITDA overachieved estimates, $11.7 million versus our $7.3 million estimate. Adj. EBITDA, which increased 33%, benefited from a $3.3 million revenue share from the successful movie launch of 2000 Mules.
Political advertising off the charts. The company generated $1.5 million in Political advertising in the latest quarter, far outpacing its highest Political year in 2020. …
This Company Sponsored Research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).
*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary. Proper due diligence is required before making any investment decision.
Seanergy Maritime (SHIP) Results in line with recent revisions
Seanergy Maritime Holdings Corp. is the only pure-play Capesize ship-owner publicly listed in the US. Seanergy provides marine dry bulk transportation services through a modern fleet of Capesize vessels. The Company’s operating fleet consists of 17 Capesize vessels with an average age of approximately 12 years and aggregate cargo carrying capacity of approximately 3,011,083 dwt. The Company is incorporated in the Marshall Islands and has executive offices in Glyfada, Greece. The Company’s common shares trade on the Nasdaq Capital Market under the symbol “SHIP” and its Class B warrants under “SHIPZ”.
Michael Heim, CFA, Senior Research Analyst, Noble Capital Markets, Inc.
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Seanergy reported 2022-2Q results in line with expectations. SHIP reported net revenues of $32.8 million up 18% over last year and slightly above our estimate of $31.1 million. EBITDA of $16.1 million met our $16.2 million estimate and reported net income of $5.9 million ($0.03 per share) was slightly above our $5.5 million ($0.03 per share) estimate. We had fine-tuned our projections last month after a conversation with management.
TCE rates were the main cause for higher year-over-year result although coming in below early guidance. Average Time Charter Equivalent rates were $23,251 for the quarter in line with our $23,000 estimate. Management had forecast a 2Q TCE rate of $24,569 at the end of the first quarter. Shipping rates remain above historical levels but have fallen as the quarter progressed and concerns of a weakening global economy emerged. Still, the overall outlook remains positive as the iron ore and coal trades are active and China begins to reopen….
This Research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).
*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary. Proper due diligence is required before making any investment decision.
SAN DIEGO, Aug. 04, 2022 (GLOBE NEWSWIRE) — Kratos Defense & Security Solutions, Inc. (Nasdaq:KTOS), a leading National Security Solutions provider, today reported its second quarter 2022 financial results. For the second quarter of 2022, Kratos reported Revenues of $224.2 million, Operating Loss of $1.9 million, Net Loss of $4.7 million, Adjusted EBITDA of $17.7 million and a book to bill ratio of 1.2 to 1.0. Included in Net Loss is a $5.5 million litigation settlement related charge resulting from the resolution of a dispute with an international customer in our Unmanned Systems segment, which contractual arrangement was entered into in March 2011, prior to Kratos’ acquisition of CEi (Composite Engineering Inc.).
Second quarter 2022 Operating Loss includes non-cash stock compensation expense of $6.3 million, and Company-funded Research and Development expense of $9.2 million, reflecting significant ongoing development efforts being made, including in our Space and Satellite business to develop our virtual, software-based OpenSpace ground station solution.
Kratos reported a second quarter 2022 GAAP loss per share of $0.04, which includes the $5.5 million litigation settlement related charge noted above, compared to Net Income of $1.1 million and GAAP EPS income of $0.01 for the second quarter of 2021. Adjusted EPS was $0.07 for the second quarter of 2022, compared to $0.06 for the second quarter of 2021. Kratos has approximately $235 million of net operating loss carryforwards, which are expected to substantially shield the Company from paying future cash income taxes.
Second quarter 2022 Revenues of $224.2 million, which increased $19.1 million, or 9.3 percent, from second quarter 2021 Revenues of $205.1 million, were adversely impacted by continuing and increased supply chain disruptions and increased material costs, COVID-related employee absenteeism and increased challenges and costs associated with hiring, obtaining and retaining qualified employees, which resulted in approximately $14.5 million of second quarter 2022 revenues being deferred into future periods, with approximately $2.9 million of associated operating income, including increased inflationary costs. Second quarter 2022 revenues include an aggregate contribution of $21.5 million from the recent acquisitions of Cosmic Advanced Engineered Solutions, Inc. (Cosmic AES), CTT, Inc., (CTT), and the Engineering Division of Southern Research (SRE), offset by reductions in our Training Solutions business of $8.6 million as compared to the second quarter 2021 revenues, including the previously reported loss of an international training services contract which accounted for approximately $4.5 million of the reduction as well as the completion of certain large training system programs. On a proforma basis, excluding the impact of the Training Solutions business, revenues grew organically 3.2% in the second quarter of 2022 as compared to the second quarter of 2021.
Second quarter 2022 Cash Flow Used in Operations was $21.6 million, with the use including increases in receivables of $27.1 million primarily related to future milestone and other contractual payments and an increase of inventory balances of $10.5 million, primarily in our Unmanned Systems, Microwave Products and C5ISR businesses in anticipation of expected significant ramps in production in the second half of the year and to increase stock inventory levels and advance buys in larger lot sizes to gain pricing benefits where possible, to mitigate the impact of supply chain disruptions and price increases. Free Cash Flow Used in Operations was $32.7 million, after funding $11.1 million of capital expenditures, including in our high growth Unmanned Systems, Space, Satellite and Cyber and Turbine Technologies business areas.
For the second quarter of 2022, Kratos’ Unmanned Systems Segment (KUS) generated Revenues of $56.4 million, as compared to $60.3 million in the second quarter of 2021. KUS Operating Loss was $5.0 million in the second quarter of 2022, which included the $5.5 million litigation settlement related charge discussed above. Excluding the impact of the litigation settlement related charge, Operating Income was $0.5 million, compared to $4.1 million in the second quarter of 2021, reflecting a less favorable mix of revenues, including an increase in development programs which typically generate lower margins, an increase in SG&A costs of approximately $0.9 million resulting primarily from increased headcount, an increase of R&D expenses of approximately $1.3 million and increases in supply chain and employee related costs.
Excluding the litigation settlement charge, KUS Adjusted EBITDA for the second quarter of 2022 was $2.9 million, compared to second quarter 2021 Adjusted EBITDA of $6.9 million, reflecting increases in certain development programs which typically generate lower margins and increases in SG&A, R&D, supply chain related and employee costs.
KUS’s book-to-bill ratio for the second quarter of 2022 was 0.5 to 1.0 and 1.1 to 1.0 for the last twelve months ended June 26, 2022, with bookings of $242.6 million for the twelve months ended June 26, 2022. Total backlog for KUS at the end of the second quarter of 2022 was $203.3 million compared to $230.5 million at the end of the first quarter of 2022.
For the second quarter of 2022, Kratos’ Government Solutions Segment (KGS) reported Revenues of $167.8 million, compared to Revenues of $144.8 million in the second quarter of 2021. The increased revenues include the aggregate contribution of approximately $21.5 million from the recently acquired Cosmic AES, CTT and SRE, offset by a reduction of $8.6 million in our Training Solutions business, including the loss of an international training contract, continued and increased supply chain, COVID and employee sourcing and retention disruptions, which resulted in second quarter 2022 KGS revenues of approximately $13.9 million being deferred into future periods. On a proforma basis, excluding the Training Solutions business, KGS revenues grew organically 7.7 percent or $10.2 million, from $132.3 million in the second quarter of 2021 to $142.5 million in the second quarter of 2022.
KGS reported operating income of $9.5 million in the second quarter of 2022, compared to $5.9 million in the second quarter of 2021, primarily reflecting a more favorable revenue mix, offset partially by increased costs related to the supply chain and employee base.
Kratos’ Space, Satellite and Cyber business generated Revenues of $88.5 million in the second quarter of 2022, compared to $67.5 million in the second quarter of 2021. Excluding revenues generated of $15.0 million from the recent Cosmic AES acquisition, revenues for our Space, Satellite and Cyber business grew organically 8.9 percent in the second quarter of 2022.
Second quarter 2022 KGS Adjusted EBITDA was $14.8 million, compared to second quarter 2021 KGS Adjusted EBITDA of $10.7 million, reflecting a more favorable mix of revenues, including in our Space, Satellite and Cyber and Turbine Technologies businesses.
For the second quarter of 2022, KGS reported a book-to-bill ratio of 1.4 to 1.0, with a book to bill ratio of 1.2 to 1.0 for the twelve months ended June 26, 2022, and bookings of $713.9 million for the twelve months ended June 26, 2022. Included in KGS is Kratos’ Space, Satellite and Cyber business, which reported a book to bill ratio of 1.7 to 1.0 for the second quarter of 2022, and a book to bill ratio of 1.2 to 1.0 for the twelve months ended June 26, 2022. Bookings for the Space, Satellite and Cyber business for the last twelve months ended June 26, 2022, were $371.1 million. KGS’s total backlog at the end of the second quarter of 2022 was $846.9 million, as compared to $751.6 million at the end of the first quarter of 2022.
For the second quarter of 2022, Kratos reported consolidated bookings of $261.0 million and a book-to-bill ratio of 1.2 to 1.0, with consolidated bookings of $956.5 million and a book-to-bill ratio of 1.1 to 1.0 for the last twelve months ended June 26, 2022. Backlog on June 26, 2022 was $1.05 billion, as compared to $982.1 million at March 27, 2022, and Kratos’ bid and proposal pipeline was $9.9 billion at June 26, 2022, as compared to $9.4 billion at March 27, 2022. Backlog at June 26, 2022 was comprised of funded backlog of $713.6 million and unfunded backlog of $336.6 million.
Eric DeMarco, Kratos’ President and CEO, said, “Kratos’ second quarter execution was solid in a challenging environment, including revenues of $224 million, Adjusted EBITDA of $17.7 million, a 1.2 to 1.0 book to bill ratio and a current opportunity pipeline of over $9 billion. We have now received each of the three important, large new satellite related program awards we discussed in our Q1 2022 report, including contracts with Blue Halo and Intelsat, which we believe position Kratos for future organic growth and increased margins beginning in the second half of this year. We believe these awards are representative of the increasing customer acceptance of Kratos’ first to market, internally funded and developed, software-based OpenSpace virtualized family of products and we are now in pursuit of several additional, large, new satellite program opportunities.”
Mr. DeMarco, continued, “Since our last report to you, the Air Force announced to Congress that the Skyborg Vanguard program, which includes Kratos’ Valkyrie, is now planned to be a Program of Record in 2023 and transition to acquisition. Additionally, Kratos’ tactical drone business continues to progress, including recent successful flights at the Burns Flat, Oklahoma range and other locations, and we are expecting to receive certain new tactical drone related contract awards in the second half of this year, including as related to Valkyrie. Also importantly, the Air Force recently announced that the Golden Horde Vanguard Program, which Kratos is also supporting, is now also slated to become a Program of Record in 2023, which includes networked, collaborative and autonomous munitions and drones.”
Mr. DeMarco concluded, “Based on important recent events and communications, we continue to believe that the global security environment and requirement for affordable, reusable, disposable and attritable high performance jet drones has never been stronger and is increasing. We view Kratos’ family of Made in America, demonstrated low-cost, runway independent, Collaborative Combat Aircraft, that have been flying with manned fighter aircraft since 2015, and are not concepts, power points or video presentations that are years away from reality, along with active Kratos serial production lines that can provide Affordable Mass now, are important differentiators for our Country, our customers and our Company.”
Financial Guidance Our third quarter and Fiscal Year 2022 financial guidance we are providing today includes our current forecasted business mix, and our assumptions related to the expected continuing impact of: employee absenteeism, employee sourcing, hiring and retention; manufacturing, production and supply chain disruptions; parts shortages and related significant cost and price increases, including for employees, materials and components; travel restrictions and other COVID-19 related items that have and continue to impact the industry and Kratos. The growth expected in the fourth quarter of 2022 is largely driven by the forecasted execution and delivery schedules of 5 new programs, 4 of which have already been awarded: the three satellite program awards, GBSD and an expected Valkyrie award from a new customer.
The revised full Fiscal Year 2022 financial guidance reflects the expected revenue growth, including the impact of the recent SRE acquisition, as well as expected organic revenue growth driven by our recent bookings and backlog. Since our contract mix is predominantly firm fixed price, we are contractually obligated to absorb the impact of significant inflationary factors until we are able to include our revised costs in new contracts or the exercise of contractual options, which is reflected in our revised Fiscal Year 2022 Adjusted EBITDA guidance.
$M
Q322
FY22
Revenues
$220 – $230
$890 – $930
R&D
$9 – $10
$35 – $38
Operating Income
$0 – $3
$13 – $18
Depreciation
$7
$24 – $25
Amortization
$3
$8 – $9
Stock Based Compensation
$6 – $7
$25 – $26
Adjusted EBITDA
$16 – $20
$80 – $85
Operating Cash Flow
$15 – $25
Capital Expenditures
$45 – $55
Free Cash Flow Use
($30 – $40)
Throughout the second quarter of 2022, we continued to experience the effects of COVID–19, including on our employees, consultants, vendors, suppliers, customers, etc. We have assumed that these COVID–19 related impacts to our business, which significantly impacted our fiscal first and second quarters of 2022 and continue to impact our third quarter, will continue at least through the end of calendar 2022. Our previous assumption was that COVID-19 related impacts would begin to subside beginning in the third fiscal quarter and continue to improve throughout the second half of our fiscal year 2022.
We currently estimate that COVID, supply chain, work force and inflation related issues, including the availability and increased costs of certain raw materials and related components and materials, a lack of capacity at mills supporting Kratos’ hardware programs, the availability and significant increased costs to obtain and the ability to retain an experienced skilled workforce will continue to impact our financial performance throughout 2022. We expect these issues to impact our third quarter 2022 Revenues by approximately $10 to $14 million and Adjusted EBITDA by approximately $3 to $5 million, respectively. We also currently estimate these issues to impact our full fiscal year 2022 Revenues by approximately $22 to $26 million and Adjusted EBITDA by approximately $10 to $13 million, respectively. We will provide future updates as appropriate.
The forecasted financial trajectory in the second half of 2022 reflects the expected mix of revenues, including the expected timing of software product deliveries in our Space, Satellite and Cyber business, based upon the forecasted order flow and roll out of our new OpenSpace solution, and contract awards we have recently received or that we have been informed we will receive, with deliveries expected to occur predominantly in the fourth quarter of 2022 based upon current program execution plans.
Forecasted third quarter 2022 and fiscal year 2022 Operating Income and Adjusted EBITDA also reflect the expected mix of development-type contracts and expected investments, including in our Space, Satellite and Cyber, Unmanned Systems, C5ISR, Turbine Technologies and Rocket System businesses, where we have received, have been informed that we will receive, or are pursuing or expect to receive several new contract awards. Kratos’ fiscal year 2022 forecasted Revenues also include the final projected impact of the 2021 loss of a large international training contract, which contributed approximately $13.0 million to the Company’s fiscal year 2021 first and second quarter Revenues and include the estimated contribution from the recently closed CTT, Cosmic AES and SRE acquisitions.
Management will discuss the Company’s second quarter 2022 financial results, as well as its third quarter and full year 2022 guidance on a conference call beginning at 2:00 p.m. Pacific (5:00 p.m. Eastern) today. The call will be available at www.kratosdefense.com. Participants may register for the call at https://register.vevent.com/register/BId7480930af214120a135751b6240fd74. While not required, it is recommended you join 10 minutes prior to the event start. Instructions are provided to ensure the necessary audio applications are downloaded and installed. Users can obtain these programs at no charge. For those who cannot access the live broadcast, a replay will be available on Kratos’ website.
About Kratos Defense & Security Solutions Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) develops and fields transformative, affordable technology, platforms, and systems for United States National Security related customers, allies, and commercial enterprises. Kratos is changing the way breakthrough technologies for these industries are rapidly brought to market through proven commercial and venture capital backed approaches, including proactive research, and streamlined development processes. At Kratos, affordability is a technology, and we specialize in unmanned systems, satellite communications, cyber security/warfare, microwave electronics, missile defense, hypersonic systems, training and combat systems and next generation turbo jet and turbo fan engine development. For more information go to www.kratosdefense.com.
Notice RegardingForward-LookingStatements This news release contains certain forward-looking statements that involve risks and uncertainties, including, without limitation, express or implied statements concerning the Company’s expectations regarding its future financial performance, including the Company’s expectations for its third quarter and full year 2022 revenues, R&D, operating income, depreciation, amortization, stock based compensation expense, and Adjusted EBITDA, and full year 2022 operating cash flow, capital expenditures and other investments, and free cash flow use, the Company’s future growth trajectory and ability to achieve improved revenue mix and profit in certain of its business segments and the expected timing of such improved revenue mix and profit, the Company’s expectation of ramp on projects and that investments in its business will result in an increase in the Company’s market share and total addressable market and position the Company for significant future organic growth, profitability, cash flow and an increase in shareholder value, the Company’s bid and proposal pipeline, demand for its products and services, including the Company’s alignment with today’s National Security requirements, ability to successfully compete in the tactical unmanned aerial system area and expected new customer awards, including the magnitude and timing of funding and the future opportunity associated with such awards, and expected contract awards related to the Company’s Skyborg Vanguard program, Golden Horde Vanguard program and other new tactical unmanned programs, performance of key contracts and programs, including the timing of production and demonstration related to certain of the Company’s contracts and product offerings, the impact of the Company’s restructuring efforts and cost reduction measures, including its ability to improve profitability and cash flow in certain business units as a result of these actions and to achieve financial leverage on fixed administrative costs, benefits to be realized from the Company’s net operating loss carry forwards, the availability and timing of government funding for the Company’s offerings, including the strength of the future funding environment, the short-term delays that may occur as a result of Continuing Resolutions or delays in DoD budget approvals, timing of LRIP and full rate production related to the Company’s unmanned aerial target system offerings, as well as the level of recurring revenues expected to be generated by these programs once they achieve full rate production, market and industry developments, and the current estimated impact of COVID-19 and employee absenteeism, supply chain disruptions, availability of an experienced skilled workforce, inflation and increased costs, and delays on our financial projections, industry, business and operations, including projected growth. Such statements are only predictions, and the Company’s actual results may differ materially from the results expressed or implied by these statements. Investors are cautioned not to place undue reliance on any such forward-looking statements. All such forward-looking statements speak only as of the date they are made, and the Company undertakes no obligation to update or revise these statements, whether as a result of new information, future events or otherwise. Factors that may cause the Company’s results to differ include, but are not limited to: risks to our business and financial results related to the reductions and other spending constraints imposed on the U.S. Government and our other customers, including as a result of sequestration and extended continuing resolutions, the Federal budget deficit and Federal government shut-downs; risks of adverse regulatory action or litigation; risks associated with debt leverage and cost savings and cash flow improvements expected as a result of the refinancing of our Senior Notes; risks that our cost-cutting initiatives will not provide the anticipated benefits; risks that changes, cutbacks or delays in spending by the U.S. DoD may occur, which could cause delays or cancellations of key government contracts; risks of delays to or the cancellation of our projects as a result of protest actions submitted by our competitors; risks that changes may occur in Federal government (or other applicable) procurement laws, regulations, policies and budgets; risks of the availability of government funding for the Company’s products and services due to performance, cost growth, or other factors, changes in government and customer priorities and requirements (including cost-cutting initiatives, the potential deferral of awards, terminations or reduction of expenditures to respond to the priorities of Congress and the Administration, or budgetary cuts resulting from Congressional committee recommendations or automatic sequestration under the Budget Control Act of 2011, as amended); risks that the UAS and UGS markets do not experience significant growth; risks that products we have developed or will develop will become programs of record; risks that we cannot expand our customer base or that our products do not achieve broad acceptance which could impact our ability to achieve our anticipated level of growth; risks of increases in the Federal government initiatives related to in-sourcing; risks related to security breaches, including cyber security attacks and threats or other significant disruptions of our information systems, facilities and infrastructures; risks related to our compliance with applicable contracting and procurement laws, regulations and standards; risks related to the new DoD Cybersecurity Maturity Model Certification (CMMC); risks related to contract performance; risks related to failure of our products or services; risks associated with our subcontractors’ or suppliers’ failure to perform their contractual obligations, including the appearance of counterfeit or corrupt parts in our products; changes in the competitive environment (including as a result of bid protests); failure to successfully integrate acquired operations and competition in the marketplace, which could reduce revenues and profit margins; risks that potential future goodwill impairments will adversely affect our operating results; risks that anticipated tax benefits will not be realized in accordance with our expectations; risks that a change in ownership of our stock could cause further limitation to the future utilization of our net operating losses; risks that we may be required to record valuation allowances on our net operating losses which could adversely impact our profitability and financial condition; risks that the current economic environment will adversely impact our business; currently unforeseen risks associated with COVID-19 and risks related to natural disasters or severe weather. These and other risk factors are more fully discussed in the Company’s Annual Report on Form 10-K for the period ended December 26, 2021, and in our other filings made with the Securities and Exchange Commission.
Note Regarding Use of Non-GAAP Financial Measures and Other
Performance Metrics This news release contains non-GAAP financial measures, including Adjusted earnings per share (computed using income from continuing operations before income taxes, excluding income (loss) from discontinued operations, excluding income (loss) attributable to non-controlling interest, excluding depreciation, amortization of intangible assets, amortization of capitalized contract and development costs, stock-based compensation expense, acquisition and restructuring related items and other, which includes, but is not limited to, legal related items and foreign transaction gains and losses, less the estimated impact to income taxes) and including Adjusted EBITDA (which includes net income (loss) attributable to noncontrolling interest and excludes, among other things, losses and gains from discontinued operations, acquisition and restructuring related items, stock compensation expense, foreign transaction gains and losses, and the associated margin rates). Additional non-GAAP financial measures include Free Cash Flow from Operations computed as Cash Flow from Operations less Capital Expenditures and Adjusted EBITDA related to our KUS and KGS businesses. Kratos believes this information is useful to investors because it provides a basis for measuring the Company’s available capital resources, the actual and forecasted operating performance of the Company’s business and the Company’s cash flow, excluding non-recurring items and non-cash items that would normally be included in the most directly comparable measures calculated and presented in accordance with GAAP. The Company’s management uses these non-GAAP financial measures, along with the most directly comparable GAAP financial measures, in evaluating the Company’s actual and forecasted operating performance, capital resources and cash flow. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP, and investors should carefully evaluate the Company’s financial results calculated in accordance with GAAP and reconciliations to those financial results. In addition, non-GAAP financial measures as reported by the Company may not be comparable to similarly titled amounts reported by other companies. As appropriate, the most directly comparable GAAP financial measures and information reconciling these non-GAAP financial measures to the Company’s financial results prepared in accordance with GAAP are included in this news release.
Another Performance Metric the Company believes is a key performance indicator in our industry is our Book to Bill Ratio as it provides investors with a measure of the amount of bookings or contract awards as compared to the amount of revenues that have been recorded during the period and provides an indicator of how much of the Company’s backlog is being burned or utilized in a certain period. The Book to Bill Ratio is computed as the number of bookings or contract awards in the period divided by the revenues recorded for the same period. The Company believes that the rolling or last twelve months’ Book to Bill Ratio is meaningful since the timing of quarter-to-quarter bookings can vary.
Unaudited Condensed Consolidated
Statements of Operations
(in millions, except per share
data)
Three Months Ended
Six Months Ended
June 26,
June 27,
June 26,
June 27,
2022
2021
2022
2021
Service revenues
$
78.8
$
58.0
$
146.7
$
115.3
Product sales
145.4
147.1
273.7
284.0
Total revenues
224.2
205.1
420.4
399.3
Cost of service revenues
56.2
41.3
106.1
83.8
Cost of product sales
110.2
111.8
204.6
212.5
Total costs
166.4
153.1
310.7
296.3
Gross profit – service revenues
22.6
16.7
40.6
31.5
Gross profit – product sales
35.2
35.3
69.1
71.5
Total gross profit
57.8
52.0
109.7
103.0
Selling, general and administrative expenses
41.6
35.6
81.9
70.9
Acquisition and restructuring related items and other
6.0
0.3
6.6
0.5
Research and development expenses
9.2
10.2
18.4
18.2
Depreciation
1.3
1.4
2.6
2.6
Amortization of intangible assets
1.6
1.2
3.3
2.6
Operating income (loss)
(1.9
)
3.3
(3.1
)
8.2
Interest expense, net
(2.9
)
(5.7
)
(8.8
)
(11.6
)
Loss on extinguishment of debt
–
–
(13.0
)
–
Other income, net
–
–
0.1
0.2
Loss from continuing operations before income taxes
(4.8
)
(2.4
)
(24.8
)
(3.2
)
Provision (benefit) for income taxes from continuing operations
0.5
(3.6
)
(3.8
)
(6.3
)
Income (loss) from continuing operations
(5.3
)
1.2
(21.0
)
3.1
Income (loss) from discontinued operations, net of income taxes
0.9
(0.3
)
0.7
(0.3
)
Net income (loss)
(4.4
)
0.9
(20.3
)
2.8
Less: Net income (loss) attributable to noncontrolling interest
0.3
–
(0.2
)
0.3
(0.2
)
Net income (loss) attributable to Kratos
$
(4.7
)
$
1.1
$
(20.6
)
$
3.0
Basic income (loss) per common share attributable to Kratos:
Income (loss) from continuing operations
$
(0.04
)
$
0.01
$
(0.17
)
$
0.02
Income (loss) from discontinued operations
–
–
0.01
–
Net income (loss)
(0.04
)
$
0.01
$
(0.16
)
$
0.02
Diluted income (loss) per common share attributable to Kratos:
Income (loss) from continuing operations
$
(0.04
)
$
0.01
$
(0.17
)
$
0.02
Income (loss) from discontinued operations
–
–
0.01
–
Net income (loss)
$
(0.04
)
$
0.01
$
(0.16
)
$
0.02
Weighted average common shares outstanding:
Basic weighted average common shares outstanding
126.4
124.7
126.2
124.4
Diluted weighted average common shares outstanding
126.4
127.7
126.2
127.8
Adjusted EBITDA (1)
$
17.7
$
17.6
$
31.5
$
35.7
Unaudited Reconciliation of GAAP to Non-GAAP Measures
Note: (1) Adjusted EBITDA is a non-GAAP measure defined as GAAP net income (loss) attributable to Kratos adjusted for net income (loss)
attributable to noncontrolling interest, income (loss) from discontinued operations, net interest expense, provision (benefit) for income taxes, depreciation and
amortization expense of intangible assets, amortization of capitalized contract and development costs, stock-based compensation,
acquisition and restructuring related items and other, and foreign transaction gain (loss).
Adjusted EBITDA as calculated by us may be calculated differently than Adjusted EBITDA for other companies. We have provided
Adjusted EBITDA because we believe it is a commonly used measure of financial performance in comparable companies and is provided to
help investors evaluate companies on a consistent basis, as well as to enhance understanding of our operating results. Adjusted EBITDA
should not be construed as either an alternative to net income or as an indicator of our operating performance or an alternative to cash flows
as a measure of liquidity. The adjustments to calculate this non-GAAP financial measure and the basis for such adjustments are outlined below.
Please refer to the following table below that reconciles GAAP net income (loss) to Adjusted EBITDA.
The adjustments to calculate this non-GAAP financial measure, and the basis for such adjustments, are outlined below:
Interest income and interest expense, net. The Company receives interest income on investments and incurs interest expense on loans, capital leases and
other financing arrangements, including the amortization of issue discounts and deferred financing costs. These amounts may vary from period to period
due to changes in cash and debt balances.
Income taxes. The Company’s tax expense can fluctuate materially from period to period due to tax adjustments that may not be directly related to
underlying operating performance or to the current period of operations and may not necessarily reflect the impact of utilization of our NOLs.
Depreciation. The Company incurs depreciation expense (recorded in cost of revenues and in operating expenses) related to capital assets purchased,
leased or constructed to support the ongoing operations of the business. The assets are recorded at cost or fair value and are depreciated over the estimated
useful lives of individual assets.
Amortization of intangible assets. The Company incurs amortization of intangible expense related to acquisitions it has made. These intangible assets are
valued at the time of acquisition and are amortized over the estimated useful lives.
Amortization of capitalized contract and development
costs. The Company incurs amortization of previously capitalized software development and non-
recurring engineering costs related to certain targets in its Unmanned Systems and ballistic missile target businesses as these units are sold.
Stock-based compensation expense. The Company incurs expense related to stock-based compensation included in its GAAP presentation of selling,
general and administrative expense. Although stock-based compensation is an expense of the Company and viewed as a form of compensation, these
expenses vary in amount from period to period, and are affected by market forces that are difficult to predict and are not within the control of management,
such as the market price and volatility of the Company’s shares, risk-free interest rates and the expected term and forfeiture rates of the awards.
Management believes that exclusion of these expenses allows comparison of operating results to those of other companies that disclose non-GAAP
financial measures that exclude stock-based compensation.
Foreign transaction (gain) loss. The Company incurs transaction gains and losses related to transactions with foreign customers in currencies other than
the U.S. dollar. In addition, certain intercompany transactions can give rise to realized and unrealized foreign currency gains and losses.
Acquisition and transaction related items. The Company incurs transaction related costs, such as legal and accounting fees and other expenses, related to
acquisitions and divestiture activities. Management believes these items are outside the normal operations of the Company’s business and are not
indicative of ongoing operating results.
Restructuring costs. The Company incurs restructuring costs for cost reduction actions which include employee termination costs,
facility shut-down related costs and remaining lease commitment costs for excess or exited facilities. Management believes that these costs are not
indicative of ongoing operating results as they are either non-recurring and/or not expected when full capacity and volumes are achieved.
Legal related items. The Company incurs costs related to pending legal settlements and other legal related matters. Management believes
these items are outside the normal operations of the Company’s business and are not indicative of ongoing operating results.
Adjusted EBITDA is a non-GAAP financial measure and should not be considered in isolation or as a substitute for financial information provided in
accordance with GAAP. This non-GAAP financial measure may not be computed in the same manner as similarly titled measures used by other
companies. The Company expects to continue to incur expenses similar to the Adjusted EBITDA financial adjustments described above, and investors
should not infer from the Company’s presentation of this non-GAAP financial measure that these costs are unusual, infrequent, or non-recurring.
Reconciliation of Net income (loss) attributable to Kratos to Adjusted EBITDA is as follows:
Three Months Ended
Six Months Ended
June 26,
June 27,
June 26,
June 27,
2022
2021
2022
2021
Net income (loss) attributable to Kratos
$
(4.7
)
$
1.1
$
(20.6
)
$
3.0
Loss (income) from discontinued operations, net of income taxes
(0.9
)
0.3
(0.7
)
0.3
Interest expense, net
2.9
5.7
8.8
11.6
Loss on extinguishment of debt
–
–
13.0
–
Provision (benefit) for income taxes from continuing operations
0.5
(3.6
)
(3.8
)
(6.3
)
Depreciation (including cost of service revenues and product sales)
5.3
5.8
10.6
10.7
Stock-based compensation
6.3
6.6
13.3
12.8
Foreign transaction loss
0.1
0.1
0.1
0.2
Amortization of intangible assets
1.6
1.2
3.3
2.6
Amortization of capitalized contract and development costs
0.3
0.3
0.6
0.5
Acquisition and restructuring related items and other
6.0
0.3
6.6
0.5
Plus: Net income (loss) attributable to noncontrolling interest
0.3
(0.2
)
0.3
(0.2
)
Adjusted EBITDA
$
17.7
$
17.6
$
31.5
$
35.7
Reconciliation of acquisition and restructuring related items and other included in Adjusted EBITDA:
Three Months Ended
Six Months Ended
June 26,
June 27,
June 26,
June 27,
2022
2021
2022
2021
Acquisition and transaction related items
$
0.1
$
0.1
$
0.4
$
0.3
Restructuring costs
0.2
0.2
0.3
0.2
Legal related items
5.7
–
5.9
–
$
6.0
$
0.3
$
6.6
$
0.5
Kratos Defense & Security
Solutions, Inc.
Unaudited Segment Data
(in millions)
Three Months Ended
Six Months Ended
June 26,
June 27,
June 26,
June 27,
2022
2021
2022
2021
Revenues:
Unmanned Systems
$
56.4
$
60.3
$
109.0
$
116.2
Kratos Government Solutions
167.8
144.8
311.4
283.1
Total revenues
$
224.2
$
205.1
$
420.4
$
399.3
Operating income (loss)
Unmanned Systems
$
(5.0
)
$
4.1
$
(4.5
)
$
8.3
Kratos Government Solutions
9.5
5.9
15.1
13.0
Unallocated corporate expense, net
(6.4
)
(6.7
)
(13.7
)
(13.1
)
Total operating income (loss)
$
(1.9
)
$
3.3
$
(3.1
)
$
8.2
Note: Unallocated corporate expense, net includes costs for certain stock-based compensation programs (including stock-based compensation costs for stock options, employee stock purchase plan and restricted stock units), the effects of items not considered part of management’s evaluation of segment operating performance, and acquisition and restructuring related items, corporate costs not allocated to the segments, legal related items, and other miscellaneous corporate activities.
Reconciliation of Segment Operating Income (Loss) to Adjusted EBITDA is as follows:
Three Months Ended
Six Months Ended
June 26,
June 27,
June 26,
June 27,
2022
2021
2022
2021
Unmanned Systems
Operating income (loss)
$
(5.0
)
$
4.1
$
(4.5
)
$
8.3
Other income
–
–
0.1
0.1
Depreciation
1.7
2.2
3.3
3.8
Amortization of intangible assets
0.2
0.3
0.5
0.6
Amortization of capitalized contract and development costs
0.3
0.3
0.6
0.5
Acquisition and restructuring related items and other
5.7
–
5.9
–
Adjusted EBITDA
$
2.9
$
6.9
$
5.9
$
13.3
% of revenue
5.1
%
11.4
%
5.4
%
11.4
%
Kratos Government Solutions
Operating income
$
9.5
$
5.9
$
15.1
$
13.0
Other income
0.1
0.1
0.1
0.3
Depreciation
3.6
3.6
7.3
6.9
Amortization of intangible assets
1.4
0.9
2.8
2.0
Acquisition and restructuring related items and other
0.2
0.2
0.3
0.2
Adjusted EBITDA
$
14.8
$
10.7
$
25.6
$
22.4
% of revenue
8.8
%
7.4
%
8.2
%
7.9
%
Total Adjusted EBITDA
$
17.7
$
17.6
$
31.5
$
35.7
% of revenue
7.9
%
8.6
%
7.5
%
8.9
%
Kratos Defense & Security
Solutions, Inc.
Unaudited Condensed Consolidated
Balance Sheets
(in millions)
June 26,
December 26,
2022
2021
Assets
Current assets:
Cash and cash equivalents
$
142.4
$
349.4
Accounts receivable, net
315.0
284.7
Inventoried costs
118.2
91.7
Prepaid expenses
12.2
9.8
Other current assets
36.5
22.5
Total current assets
624.3
758.1
Property, plant and equipment, net
212.2
168.3
Operating lease right-of-use assets
38.1
38.5
Goodwill
551.9
493.9
Intangible assets, net
64.9
43.2
Other assets
91.9
87.5
Total assets
$
1,583.3
$
1,589.5
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable
$
58.2
$
50.4
Accrued expenses
36.0
27.2
Accrued compensation
50.1
47.3
Accrued interest
0.3
1.5
Billings in excess of costs and earnings on uncompleted contracts
59.2
58.1
Current portion of operating lease liabilities
10.6
10.1
Other current liabilities
12.5
25.7
Other current liabilities of discontinued operations
0.9
0.8
Total current liabilities
227.8
221.1
Long-term debt
293.8
296.7
Operating lease liabilities, net of current portion
31.5
32.7
Other long-term liabilities
82.9
76.2
Other long-term liabilities of discontinued operations
1.4
2.5
Total liabilities
637.4
629.2
Commitments and contingencies
Redeemable noncontrolling interest
7.8
15.2
Stockholders’ equity:
Additional paid-in capital
1,593.1
1,578.9
Accumulated other comprehensive loss
–
0.6
Accumulated deficit
(655.0
)
(634.4
)
Total Kratos stockholders’ equity
938.1
945.1
Total liabilities and stockholders’ equity
$
1,583.3
$
1,589.5
Kratos Defense & Security
Solutions, Inc.
Unaudited Condensed Consolidated
Statements of Cash Flows
(in millions)
Six Months Ended
June 26,
June 27,
2022
2021
Operating activities:
Net income (loss)
$
(20.3
)
$
2.8
Less: income (loss) from discontinued operations
0.7
(0.3
)
Income (loss) from continuing operations
(21.0
)
3.1
Adjustments to reconcile income (loss) from continuing operations to net cash provided by (used in) operating activities from continuing operations:
Depreciation and amortization
13.9
13.3
Amortization of lease right-of-use assets
5.3
4.5
Deferred income taxes
0.4
(0.9
)
Stock-based compensation
13.3
12.8
Litigation related charges
5.5
–
Amortization of deferred financing costs
0.4
0.5
Loss on extinguishment of debt
13.0
–
Provision for (recovery of) doubtful accounts
–
(0.2
)
Changes in assets and liabilities, net of acquisitions:
Accounts receivable
0.3
15.5
Unbilled receivables
(15.3
)
(7.9
)
Inventoried costs
(25.8
)
(6.8
)
Prepaid expenses and other assets
(13.2
)
(2.2
)
Operating lease liabilities
(5.5
)
(4.5
)
Accounts payable
5.6
5.8
Accrued compensation
(1.3
)
(1.8
)
Accrued expenses
7.7
(7.5
)
Accrued interest
(1.1
)
–
Billings in excess of costs and earnings on uncompleted contracts
1.3
9.6
Income tax receivable and payable
(6.2
)
(6.1
)
Other liabilities
(6.8
)
(5.2
)
Net cash provided by (used in) operating activities from continuing operations
(29.5
)
22.0
Investing activities:
Cash paid for acquisitions, net of cash acquired
(131.9
)
(6.2
)
Capital expenditures
(21.9
)
(20.5
)
Proceeds from sale of assets
0.1
–
Net cash used in investing activities from continuing operations
(153.7
)
(26.7
)
Financing activities:
Proceeds from the issuance of long-term debt
200.0
–
Repayment of debt
(309.8
)
–
Debt issuance costs
(3.2
)
–
Credit agreement borrowings
100.0
–
Payment under finance leases
(0.6
)
(0.4
)
Payments of employee taxes withheld from share-based awards
(11.5
)
(8.5
)
Proceeds from shares issued under equity plans
2.9
2.5
Net cash used in financing activities from continuing operations
(22.2
)
(6.4
)
Net cash flows from continuing operations
(205.4
)
(11.1
)
Net operating cash flows of discontinued operations
(0.4
)
(0.8
)
Effect of exchange rate changes on cash and cash equivalents
(1.2
)
(0.3
)
Net decrease in cash, cash equivalents and restricted cash
(207.0
)
(12.2
)
Cash, cash equivalents and restricted cash at beginning of period
349.4
381.5
Cash, cash equivalents and restricted cash at end of period
$
142.4
$
369.3
Kratos Defense & Security
Solutions, Inc.
Unaudited Non-GAAP Measures
Computation of Adjusted Earnings
Per Share
(in millions, except per share
data)
Adjusted income from continuing operations and adjusted income from continuing operations per diluted common share (Adjusted EPS) are non-GAAP
measures for reporting financial performance and exclude the impact of certain items and, therefore, have not been calculated in accordance with GAAP. Management
believes that exclusion of these items assists in providing a more complete understanding of the Company’s underlying continuing operations results and trends and allows
for comparability with our peer company index and industry. The Company uses these measures along with the corresponding GAAP financial measures
to manage the Company’s business and to evaluate its performance compared to prior periods and the marketplace. The Company defines adjusted
income from continuing operations before amortization of intangible assets, depreciation, stock-based compensation, foreign transaction gain/loss, and
acquisition and restructuring related items and other. The estimated impact to income taxes includes the impact to the effective tax rate, current tax provision and
deferred tax provision, and excludes the impact of discrete items, including transaction related expenses and release of valuation allowance, or benefit related to the add-backs.*
Adjusted EPS reflects adjusted income on a per share basis using weighted average diluted shares outstanding.
The following table reconciles the most directly comparable GAAP financial measures to the non-GAAP financial measures.
Three Months Ended
Six Months Ended
June 26,
June 27,
June 26,
June 27,
2022
2021
2022
2021
Net income (loss) attributable to Kratos
$
(4.7
)
$
1.1
$
(20.6
)
$
3.0
Less: GAAP provision (benefit) for income taxes
0.5
(3.6
)
(3.8
)
(6.3
)
Less: Net (income) loss attributable to noncontrolling interest
0.3
(0.2
)
0.3
(0.2
)
Less: Income (loss) from discontinued operations, net of income taxes
(0.9
)
0.3
(0.7
)
0.3
Loss from continuing operations before taxes
(4.8
)
(2.4
)
$
–
(24.8
)
(3.2
)
Add: Amortization of intangible assets
1.6
1.2
–
3.3
2.6
Add: Amortization of capitalized contract and development costs
0.3
0.3
0.6
0.5
Add: Depreciation
5.3
5.8
10.6
10.7
Add: Stock-based compensation
6.3
6.6
13.3
12.8
Add: Loss on extinguishment of debt
–
–
13.0
–
Add: Foreign transaction loss
0.1
0.1
0.1
0.2
Add: Acquisition and restructuring related items and other
6.0
0.3
6.6
0.5
Non-GAAP Adjusted income from continuing
operations before income taxes
14.8
11.9
22.7
24.1
Income taxes on Non-GAAP measure Adjusted income from continuing operations*
5.4
4.3
8.2
8.8
Non-GAAP Adjusted net income
$
9.4
$
7.6
$
14.5
$
15.3
Diluted earnings per common share
$
(0.04
)
$
0.01
$
(0.16
)
$
0.02
Less: GAAP provision (benefit) for income taxes
–
(0.03
)
(0.03
)
(0.05
)
Less: Net income (loss) attributable to noncontrolling interest
–
–
–
–
Less: Loss (income) from discontinued operations, net of income taxes
–
–
(0.01
)
–
Add: Amortization of intangible assets
0.01
0.01
0.03
0.02
Add: Amortization of capitalized contract and development costs
–
–
–
0.01
Add: Depreciation
0.04
0.05
0.08
0.08
Add: Stock-based compensation
0.05
0.05
0.11
0.10
Add: Loss on extinguishment of debt
–
–
0.10
–
Add: Foreign transaction loss
–
–
–
–
Add: Acquisition and restructuring related items and other
0.05
–
0.05
0.01
Income taxes on Non-GAAP measure Adjusted income from continuing operations*
(0.04
)
(0.03
)
(0.06
)
(0.07
)
Adjusted income from continuing operations per diluted
common share
$
0.07
$
0.06
$
0.11
$
0.12
Weighted average diluted common shares outstanding
126.4
127.7
126.2
127.8
*The impact to income taxes is calculated by recasting income before income taxes to include the add-backs involved in determining Adjusted income from continuing
operations before income taxes and recalculating the income tax provision (benefit), including current and deferred income taxes, using the Adjusted income from continuing
operations before income taxes. The recalculation also adjusts for any discrete tax expense, including transaction related expenses and the release of valuation allowance, or
Noble on the Road Presents: Great Lakes Dredge & Dock Corporation Investor Day
Noble Capital Markets is hosting an investor day with Great Lakes Dredge & Dock for the New York financial community on Tuesday, September 13th. CEO Lasse Petterson and CFO Scott Kornblau will present and answer questions. This is a no cost event for investors to get to know the company and management.
Great Lakes Dredge & Dock Corporation (NASDAQ: GLDD) is a leading provider of dredging services in the United States specializing in projects that help improve and protect our nation’s infrastructure and coastlines. With a robust portfolio of major dredging projects, the company brings extensive experience and a strong safety record.
Noble senior analyst Joe Gomes follows the company and has an Outperform rating with a $17.05 price target.
To learn more about Great Lakes Dredge & Dock, click here. The research is complimentary to you.
Noble on the Road Presents: The GEO Group Investor Day
Noble Capital Markets is hosting an investor day with The GEO Group for the New York and Connecticut financial communities on Wednesday, September 14th. Brian Evans, CFO of The GEO Group, will present and answer questions. This is a no cost event for investors to get to know the company and management.
GEO provides complementary, turnkey solutions for numerous government partners worldwide across a spectrum of diversified correctional and community reentry services. From the development of state-of-the-art facilities and the provision of management services and evidence-based rehabilitation to the post-release reintegration and supervision of individuals in the community, GEO offers fully diversified, cost-effective services that deliver enhanced quality and improved outcomes
Noble senior analyst Joe Gomes follows the company and has an Outperform rating with a $15 price target.
To learn more about The GEO Group, click here. The research is complimentary to you.
Noble on the Road Presents: FAT Brands Investor Day
Noble Capital Markets is hosting an investor day with FAT Brands for the New York financial community on Thursday, September 15th. Andy Wiederhorn, CEO of FAT Brands, will present and answer questions. This is a no cost event for investors to get to know the company and management.
FAT Brands (NASDAQ: FAT) is a leading global franchising company that strategically acquires, markets and develops fast casual and casual dining restaurants worldwide. The company’s portfolio includes 15 different brands and franchises over 2,300 units worldwide.
Noble senior analyst Joe Gomes follows the company and has an Outperform rating with a $25 price target.
To learn more about FAT Brands, click here. The research is complimentary to you.
Is a Metaverse Presence or Product Becoming Less of a Priority for Businesses?
Match Group CEO told Tinder metaverse unit he wants to stay in touch; he has a lot going on right now; that funds are tight, and until we meta again. While he sees a future with the metaverse, there are other units the company has a greater interest in, so it’s not ready for a full commitment.
A number of tech companies had the exact right product for consumers to better adapt to lockdowns during the pandemic. Many of these companies may have gotten ahead of themselves, planning for the lockdown lifestyle to continue strong. Examples include Meta (Meta), which announced last week that it may change its strategy and lay off staff, Peloton (PLTN), which announced in July it will exit all in-house manufacturing and instead outsource more to Taiwan, online retailer Amazon (AMZN), which shrank workers by 100,000 last quarter, and Robinhood (HOOD) which also announced cutting back on staff and growth plans.
Match Group (MTCH) owns dating apps Match.com, Tinder, and Hinge. The CEO, Bernard Kim, cited economic uncertainty as a reason for its pulling its planned investment in Hyperconnect, the company’s metaverse initiative. Bernard Kim discussed these plans in a letter to shareholders dated August 2.
Mr. Kim wrote that he scaled back on Hyperconnect as the company would be reducing its metaverse ambitions. Tinder acquired Hyperconnect last year. The division focuses on video, AI, and augmented reality technology. Its avatar-based “Single Town” experience was planned to be a meeting place in the metaverse for Tinder customers.
Source: Match
Group Letter to Shareholders (August 2, 2022)
Kim has only been the CEO for 62 days (as of the date on the shareholder letter). He shared that as he settles into the role and shapes the culture of the various divisions, taking advantage of the easier growth potential from lower hanging fruit should come before other priorities. Referring to a slowdown in domestic growth, Kim explained, “Although the overall market opportunity remains substantial, the current environment is presenting some unique trends related to consumer behavior. While people have generally moved past lockdowns and entered a more normal way of life, their willingness to try online dating products for the first time hasn’t yet returned to pre-pandemic levels.” We are still seeing higher engagement from pre-existing users compared to before the pandemic.” He said he’d challenge staff to make increase the rate of first-time users.
The company sees the largest untapped market opportunity in the Asia Pacific region as well as parts of Europe. One current headwind is the rise in the dollar vs. other currencies.
Take Away
Match Group expects the metaverse dating experience is important to capture the next generation of Users. The Hyperconnect division (purchased by Tinder last year) has been innovating in the virtual world. However, given “uncertainty about the ultimate contours of the metaverse and what will or won’t work, as well as the more challenging operating environment,” the company is not ready for a full commitment. Kim said, “We’ll continue to evaluate this space carefully, and we will consider moving forward at the appropriate time when we have more clarity on the overall opportunity and feel we have a service that is well-positioned to succeed.
HOUSTON, Aug. 4, 2022 /PRNewswire/ — Direct Digital Holdings (Nasdaq: DRCT) (“Direct Digital”), a leading advertising and marketing technology platform and owner of operating companies Colossus SSP, Huddled Masses and Orange 142, will report financial results for the second quarter ended June 30, 2022, on Thursday, August 11, 2022 after the U.S. stock market closes. Management will host a conference call and webcast on the same day at 5:00 P.M. ET to discuss the results.
About
Direct Digital Holdings Direct Digital Holdings (Nasdaq: DRCT), owner of operating companies Colossus SSP, Huddled Masses and Orange 142, brings state-of-the-art sell- and buy-side advertising platforms together under one umbrella company. Direct Digital Holdings’ sell-side platform, Colossus SSP, offers advertisers of all sizes extensive reach within general market and multicultural media properties. The company’s subsidiaries Huddled Masses and Orange142 deliver significant ROI for middle market advertisers by providing data-optimized programmatic solutions at scale for businesses in sectors that range from energy to healthcare to travel to financial services. Direct Digital Holdings’ sell- and buy-side solutions manage approximately 70,000 clients monthly, generating over 90 billion impressions per month across display, CTV, in-app and other media channels. The company has been named a top minority-owned business by The Houston Business Journal.
Spin-off
of United Maritime Corporation (“United”) and distribution of United’s
common shares to Seanergy’s shareholders
Quarterly
dividend of $0.025 per share for Q2 2022, payable on or about October 11,
2022 to all common shareholders of record as of September 25, 2022
Total
cash dividends of $0.10 per common share to the Company’s shareholders in
2022 to date plus the distribution of United’s shares
Additional
repurchase plan of up to $5.0 million, on top of the $26.7 million
buybacks completed in Q4 2021 / Q1 2022
Delivery
of the recently acquired Capesize vessel and commencement of period
employment
New
financing and refinancing transactions totaling $80.3 million with
improved pricing and overall loan terms
$28.0
million commitment letter from a prominent European lender for the
refinancing of the last balloon remaining for 2022
No
remaining loan maturities until Q4 2023
1 Adjusted EPS, Adjusted Net Income, EBITDA and Adjusted EBITDA are non-GAAP measures. Please see the reconciliation below of Adjusted EPS, Adjusted Net Income, EBITDA and Adjusted EBITDA to net income, the most directly comparable U.S. GAAP measure.
ATHENS, Greece, Aug. 04, 2022 (GLOBE NEWSWIRE) — Seanergy Maritime Holdings Corp. (“Seanergy” or the “Company”) (NASDAQ: SHIP), announced today its financial results for the second quarter and six months ended June 30, 2022. The Company also declared a quarterly dividend of $0.025 per common share for the second quarter of 2022.
For the quarter ended June 30, 2022, the Company generated Net Revenues of $32.8 million, a 18% increase compared to the second quarter of 2021. Adjusted EBITDA for the quarter was $17.3 million, a 53% increase compared to $11.3 million in the same period of 2021. Net Income and Adjusted Net Income for the quarter were $5.9 million and $7.1 million a 203% and 187% increase respectively, compared to Net Income of $2.0 million and Adjusted Net Income of $2.5 million in the second quarter of 2021. The daily Time Charter Equivalent (“TCE rate”1) of the fleet for the second quarter of 2022 was $23,251, marking a 16% increase compared to $20,095 for the same period of 2021.
For the six-month period ended June 30, 2022, Net Revenues were $62.5 million, increased by 30% when compared to $48.2 million in same period of 2021. Adjusted EBITDA for the first six months of 2022 was $34.1 million, a 77% increase compared to $19.2 million in the same period of 2021. The daily TCE of the fleet for the first six months of 2022 was $21,207 compared to $18,327 in the first six months of 2021. The average daily OPEX was $6,510 compared to $5,766 of the respective period of 2021.
Cash, cash-equivalents and restricted cash, as of June 30, 2022, stood at $41.4 million. Shareholders’ equity at the end of the second quarter was $233.7 million. Long-term debt (senior loans, convertible note and other financial liabilities) net of deferred charges stood at $257.6 million, while the book value of our fleet stood at $455.0 million.
1 TCE rate is a non-GAAP measure. Please see the reconciliation below of TCE rate to net revenues from vessels, the most directly comparable U.S. GAAP measure.
Stamatis
Tsantanis, the Company’s Chairman & Chief Executive Officer, stated:
“Seanergy reported record financial results for the second quarter and the first half of the year. Based on the sustained profitability of Seanergy, we are declaring a quarterly dividend of $0.025 per share for Q2 2022, which represents approximately 63% of our adjusted net income for the period. Over the last three quarters, we will have distributed approximately $18.0 million or $0.10 per share to our shareholders.
“Concerning our results for the second quarter of 2022, our daily TCE was $23,251, marking an increase of 16% compared to the TCE of the second quarter of 2021. The TCE for the first 6 months of 2022 was $21,207 per day as compared to a daily TCE of approximately $18,327 in the first half of 2021. Most importantly, the TCE of our fleet outperformed the Baltic Capesize Index (“BCI”) average in the first six months of 2022 by 17%. Our guidance for the third quarter is $23,650 per day.
“Adjusted EBITDA for the second quarter and first half of 2022 was $17.3 million and $34.1 million, respectively, marking a 53% and a 77% increase versus the respective periods of 2021. Net income for the quarter was approximately $5.9 million, while that of the first half was $9.6 million.
“We also recently completed the spin-off of United, which commenced trading on the NASDAQ Capital Market on July 6, 2022, under the ticker “USEA”. The distribution of all of United’s common shares to our shareholders represents a significant return of value.
“Lastly, concerning our shareholder rewards plan, following the successful execution of two buyback plans of shares and equity-linked instruments totaling $26.7 million, our Board of Directors authorized an additional share repurchase plan of $5 million. Including the aforementioned dividend payments, a total of $44.7 million of the Company’s cash has been allocated to activities which directly reward our shareholders since the fourth quarter of 2021.
“In the second quarter, we concluded the acquisition of another quality Japanese Capesize vessel, replacing the M/V Gloriuship that was spun out to United. The new acquisition, renamed M/V Honorship, was delivered to us in June and immediately commenced its period employment for approximately 2 years with NYK Line.
“On the financing front, in 2022 to-date, we have successfully concluded new financings and refinancings of $80.3 million while obtaining a commitment letter from a prominent European lender for the last remaining loan maturity in 2022. In addition to the replacement of legacy debt at considerably improved terms, one of our new facilities includes a significant sustainability-linked element. This is aligned with our intention to incorporate our ESG agenda in every aspect of our corporation.
“Concerning our fleet developments, we have now successfully completed installations of ballast water treatment systems on 100% of our fleet and have upgraded various vessels by installing Energy Saving Devices. In most cases, these projects are accompanied by agreements with our charterers to increase the daily hire rate, reflecting the improved performance of the underlying vessels, as well as to extend the respective time-charter periods. As a result, we believe our fleet is optimally positioned commercially and operationally.
“Looking ahead, considering the favorable demand and vessel-supply fundamentals of our sector, we are optimistic about the prospects of the Capesize market for the coming years.”
Company
Fleet:
Vessel
Name
Capacity (DWT)
Year Built
Yard
Scrubber Fitted
Employment Type
FFA conversion option(18)
Minimum T/C expiration
Maximum T/C expiration(19)
Patriotship
181,709
2010
Imabari
Yes
T/C – fixed rate(1)
–
06/2022
12/2022
Dukeship
181,453
2010
Sasebo
–
T/C Index Linked(2)
Yes
01/2022
06/2023
Worldship
181,415
2012
Koyo – Imabari
Yes
T/C – fixed rate(3)
–
09/2022
01/2023
Hellasship
181,325
2012
Imabari
–
T/C Index Linked(4)
–
12/2023
04/2024
Honorship
180,242
2010
Imabari
–
T/C Index Linked(5)
Yes
02/2024
06/2024
Fellowship
179,701
2010
Daewoo
–
T/C Index Linked(6)
Yes
06/2024
10/2024
Championship
179,238
2011
Sungdong SB
Yes
T/C Index Linked(7)
Yes
11/2023
11/2023
Partnership
179,213
2012
Hyundai
Yes
T/C Index Linked(8)
Yes
10/2022
11/2023
Knightship
178,978
2010
Hyundai
Yes
T/C Index Linked(9)
–
05/2023
11/2023
Lordship
178,838
2010
Hyundai
Yes
T/C Index Linked(10)
Yes
05/2022
09/2022
Goodship
177,536
2005
Mitsui
–
T/C Index Linked(11)
Yes
08/2022
11/2022
Friendship
176,952
2009
Namura
–
T/C Index Linked(12)
–
12/2023
03/2024
Tradership
176,925
2006
Namura
–
T/C Index Linked(13)
Yes
06/2023
10/2023
Flagship
176,387
2013
Mitsui
–
T/C Index Linked(14)
Yes
05/2026
05/2026
Geniuship
170,057
2010
Sungdong SB
–
T/C Index Linked(15)
Yes
01/2023
05/2023
Premiership
170,024
2010
Sungdong SB
Yes
T/C Index Linked(16)
–
11/2022
05/2023
Squireship
170,018
2010
Sungdong SB
Yes
T/C Index Linked(17)
–
12/2022
06/2023
Total/Average age
3,020,012
12.1
(1)
Chartered by a European cargo operator and delivered to the charterer on June 7, 2021 for a period of about 12 to about 18 months. The daily charter hire is fixed at $31,000.
(2)
Chartered by NYK and delivered to the charterer on December 1, 2021 for a period of about 13 to about 18 months. The daily charter hire is based on the BCI.
(3)
Chartered by a U.S. commodity trading company and delivered to the charterer on September 2, 2021 for a period of about 12 to about 16 months. The daily charter hire is fixed at $31,750.
(4)
Chartered by NYK and delivered to the charterer on May 10, 2021 for an initial period of minimum 11 to maximum 15 months, which was further extended until minimum December 2023 to maximum March 2024. The daily charter hire is based on the BCI.
(5)
Chartered by NYK and delivered to the charterer on June 30, 2022 for a period of about 20 to about 24 months. The daily charter hire is based on the BCI.
(6)
Chartered by Anglo American, a leading global mining company, and delivered to the charterer on June 18, 2021 for an initial period of minimum 12 to about 15 months, which was further extended for a period of minimum 20 to about 24 months starting as of October 2022. The daily charter hire is based on the BCI.
(7)
Chartered by Cargill and delivered to the charterer on November 7, 2018 for a period of employment of 60 months, with an additional period of about 16 to about 18 months. The daily charter hire is based on the BCI plus a net daily scrubber premium of $1,740.
(8)
Chartered by a major European utility and energy company and delivered to the charterer on September 11, 2019 for an initial period of minimum 33 to maximum 37, ending in October 2022. Pursuant to a charterer’s option the time-charter (“T/C”) was extended for a further 11 to 13 months. According to the terms of the agreement, the charterer has an additional 11 to 13 months optional period. The daily charter hire is based on the BCI.
(9)
Chartered by Glencore and delivered to the charterer on May 15, 2020 for a period of about 36 to about 42 months with two optional periods of 11 to 13 months. The daily charter hire is based on the BCI.
(10)
Chartered by a major European utility and energy company and delivered on August 4, 2019 for a period of minimum 33 to maximum 37 months with an optional period of about 11 to maximum 13 months. The daily charter hire is based on the BCI.
(11)
Chartered by an international commodities trader and delivered to the charterer on November 12, 2021 for a period of about 9 to about 12 months. The daily charter hire is based on the BCI.
(12)
Chartered by NYK and delivered to the charterer on July 29, 2021 for an initial period of minimum 17 to maximum 24 months, which was extended until minimum December 2023 to maximum March 2024. The daily charter hire is based on the BCI.
(13)
Chartered by a major European operator and delivered to the charterer on July 26, 2022 for a period of about 11 to about 15 months. The daily charter hire is based on the BCI.
(14)
Chartered by Cargill. The vessel was delivered to the charterer on May 10, 2021 for a period of 60 months. The daily charter hire is based at a premium over the BCI minus $1,325 per day.
(15)
Chartered by NYK and delivered to the charterer on February 6, 2022 for a period of about 11 to about 15. The daily charter hire is based on the BCI.
(16)
Chartered by Glencore and delivered to the charterer on November 29, 2019 for a period of minimum 36 to maximum 42 months with two optional periods of minimum 11 to maximum 13 months. The daily charter hire is based on the BCI plus a net daily scrubber premium of $2,055.
(17)
Chartered by Glencore and delivered to the charterer on December 19, 2019 for a period of minimum 36 to maximum 42 months with two optional periods of minimum 11 to maximum 13 months. The daily charter hire is based on the BCI plus a net daily scrubber premium of $2,055.
(18)
The Company has the option to convert the index-linked rate to a fixed one for a period ranging between 2 and 12 months, based on the prevailing Capesize FFA Rate for the selected period.
(19)
The latest redelivery date does not include any additional optional period.
Fleet Data:
(U.S. Dollars in thousands)
Q2 2022
Q2 2021
6M 2022
6M 2021
Ownership days (1)
1,551
1,164
3,081
2,155
Operating days (2)
1,341
1,122
2,823
2,055
Fleet utilization (3)
86.5%
96.4%
91.6%
95.4%
TCE rate (4)
$23,251
$20,095
$21,207
$18,327
Daily Vessel Operating Expenses (5)
$6,575
$5,908
$6,510
$5,766
(1)
Ownership days are the total number of calendar days in a period during which the vessels in a fleet have been owned or chartered in. Ownership days are an indicator of the size of the Company’s fleet over a period and affect both the amount of revenues and the amount of expenses that the Company recorded during a period.
(2)
Operating days are the number of available days in a period less the aggregate number of days that the vessels are off-hire due to unforeseen circumstances. Operating days includes the days that our vessels are in ballast voyages without having finalized agreements for their next employment.
(3)
Fleet utilization is the percentage of time that the vessels are generating revenue and is determined by dividing operating days by ownership days for the relevant period.
(4)
TCE rate is defined as the Company’s net revenue less voyage expenses during a period divided by the number of the Company’s operating days during the period. Voyage expenses include port charges, bunker (fuel oil and diesel oil) expenses, canal charges and other commissions. The Company includes the TCE rate, a non-GAAP measure, as it believes it provides additional meaningful information in conjunction with net revenues from vessels, the most directly comparable U.S. GAAP measure, and because it assists the Company’s management in making decisions regarding the deployment and use of our vessels and because the Company believes that it provides useful information to investors regarding our financial performance. The Company’s calculation of TCE rate may not be comparable to that reported by other companies. The following table reconciles the Company’s net revenues from vessels to the TCE rate.
(In thousands of U.S. Dollars,
except operating days and TCE rate)
Q2 2022
Q2 2021
6M 2022
6M 2021
Net revenues from vessels
32,847
27,832
62,513
48,230
Less: Voyage expenses
1,667
5,285
2,646
10,567
Time charter equivalent revenues
31,180
22,547
59,867
37,663
Operating
days
1,341
1,122
2,823
2,055
TCE rate
$23,251
$20,095
$21,207
$18,327
(5)
Vessel operating expenses include crew costs, provisions, deck and engine stores, lubricants, insurance, maintenance and repairs. Daily Vessel Operating Expenses are calculated by dividing vessel operating expenses, excluding pre delivery costs, by ownership days for the relevant time periods. The Company’s calculation of daily vessel operating expenses may not be comparable to that reported by other companies. The following table reconciles the Company’s vessel operating expenses to daily vessel operating expenses.
(In thousands of U.S. Dollars,
except ownership days and Daily Vessel Operating Expenses)
Q2 2022
Q2 2021
6M 2022
6M 2021
Vessel operating expenses
10,529
8,879
20,441
14,428
Less: Pre-delivery expenses
331
2,002
384
2,002
Vessel operating expenses before pre-delivery expenses
10,198
6,877
20,057
12,426
Ownership
days
1,551
1,164
3,081
2,155
Daily Vessel Operating Expenses
$6,575
$5,908
$6,510
$5,766
Net Income to EBITDA and Adjusted
EBITDA Reconciliation:
(In thousands of U.S. Dollars)
Q2 2022
Q2 2021
6M 2022
6M 2021
Net income
5,935
1,961
9,606
640
Add: Net interest and finance cost
3,163
4,277
6,013
8,307
Add: Depreciation and amortization
7,034
4,520
13,299
8,337
Add: Taxes
(28
)
–
(28
)
–
EBITDA
16,104
10,758
28,890
17,284
Add: Stock based compensation
1,163
528
3,842
1,931
Add: Loss on extinguishment of debt
6
–
1,285
–
Less: Loss on forward freight agreements, net
36
–
72
–
Adjusted EBITDA
17,309
11,286
34,089
19,215
Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) represents the sum of net income / (loss), net interest and finance costs, depreciation and amortization and, if any, income taxes during a period. EBITDA is not a recognized measurement under U.S. GAAP. Adjusted EBITDA represents EBITDA adjusted to exclude stock-based compensation, loss on forward freight agreements, net, and loss on extinguishment of debt, which the Company believes are not indicative of the ongoing performance of its core operations.
EBITDA and adjusted EBITDA are presented as we believe that these measures are useful to investors as a widely used means of evaluating operating profitability. EBITDA and adjusted EBITDA as presented here may not be comparable to similarly titled measures presented by other companies. These non-GAAP measures should not be considered in isolation from, as a substitute for, or superior to, financial measures prepared in accordance with U.S. GAAP.
Adjusted
Net income Reconciliation and calculation of Adjusted Net Income Per Share
(In thousands of U.S. Dollars)
Q2 2022
Q2 2021
6M 2022
6M 2021
Net income
5,935
1,961
9,606
640
Add: Stock based compensation
1,163
528
3,842
1,931
Add: Loss on extinguishment of debt
6
–
1,285
–
Less: Loss on forward freight agreements, net
36
–
72
–
Adjusted net income
7,140
2,489
14,805
2,571
Adjusted net income per common share, basic
0.04
0.02
0.09
0.02
Adjusted net income per common share, diluted
0.04
0.02
0.08
0.02
Weighted average number of common shares outstanding, basic
172,559,248
160,171,874
172,437,211
137,590,311
Weighted average number of common shares outstanding, diluted
177,368,289
165,864,695
178,074,877
143,292,880
To derive Adjusted Net Income/(Loss) and Adjusted Earnings/(Loss) Per Share from Net Income/(Loss), we exclude non-cash items, as provided in the table above. We believe that Adjusted Net Income/(Loss) and Adjusted Earnings/(Loss) Per Share assist our management and investors by increasing the comparability of our performance from period to period since each such measure eliminates the effects of such non-cash items as gain/(loss) on extinguishment of debt and other items which may vary from year to year, for reasons unrelated to overall operating performance. In addition, we believe that the presentation of the respective measure provides investors with supplemental data relating to our results of operations, and therefore, with a more complete understanding of factors affecting our business than with GAAP measures alone. Our method of computing Adjusted Net Income/(Loss) and Adjusted Earnings/(Loss) Per Share may not necessarily be comparable to other similarly titled captions of other companies due to differences in methods of calculation.
Interest
and Finance Costs to Cash Interest and Finance Costs Reconciliation:
(In thousands of U.S. Dollars)
Q2 2022
Q2 2021
6M 2022
6M 2021
Interest and finance costs, net
(3,163
)
(4,277
)
(6,013
)
(8,307
)
Add: Amortization of deferred finance charges and other discounts
617
1,068
1,275
1,876
Add: Amortization of convertible note beneficial conversion feature
–
680
–
1,238
Cash interest and finance costs
(2,546
)
(2,529
)
(4,738
)
(5,193
)
Third Quarter 2022 TCE Guidance:
As of the date hereof, approximately 62% of the Company fleet’s expected operating days in the third quarter of 2022 have been fixed at an estimated TCE of approximately $26,600. Assuming that for the remaining operating days of our index-linked T/Cs, the respective vessels’ TCE will be equal to the average Forward Freight Agreement (“FFA”) rate of $19,865 per day (based on the FFA curve of August 1, 2022), our estimated TCE for the third quarter of 2022 will be approximately $23,6501. Our TCE guidance for the third quarter of 2022 includes certain conversions (three vessels) of index-linked charters to fixed, which were concluded in previous quarters as part of our freight hedging strategy. The following table provides the break-down:
Operating Days
TCE
TCE – fixed rate (index-linked conversion)
281
$33,839
TCE – fixed rate
183
$29,992
TCE – index-linked unhedged
1,102
$19,998
Total / Average
1,566
$23,650
1 This guidance is based on certain assumptions and there can be no assurance that these TCE estimates, or projected utilization will be realized. TCE estimates include certain floating (index) to fixed rate conversions concluded in previous periods. For vessels on index-linked T/Cs, the TCE realized will vary with the underlying index, and for the purposes of this guidance, the TCE assumed for the remaining operating days of the quarter for an index-linked T/C is equal to the average FFA rate of $19,865. Spot estimates are provided using the load-to-discharge method of accounting. Over the duration of the voyage (discharge-to-discharge) there is no difference in the total revenues and costs to be recognized. The rates quoted are for days currently contracted. Increased ballast days at the end of the quarter will reduce the additional revenues that can be booked based on the accounting cut-offs and therefore the resulting TCE will be reduced accordingly.
Second
Quarter and Recent Developments:
Dividend Distribution and
Declaration of Q2 Dividend
On July 14, 2022, the Company paid the previously-announced quarterly dividend of $0.025 per share, for the first quarter of 2022. Committed to its dividend strategy, the Company also declared a cash dividend of $0.025 per share for the second quarter of 2022 payable on or about October 11, 2022 to the shareholders of record as of September 25, 2022.
Additional Share Buyback Plan
In June 2022, the Board of Directors of the Company authorized an additional share repurchase plan, under which the Company may repurchase up to $5.0 million of its outstanding common shares, convertible note or warrants. Since the fourth quarter of 2021 to date, the Company has repurchased $26.7 million of outstanding common shares, convertible notes and warrants reducing its financial leverage and preventing a potential dilution.
Vessel acquisitions and commercial
updates
M/V
Honorship In June 2022, the Company took delivery of the 180,242 dwt Capesize bulk carrier, built in 2010 in Japan, which was renamed M/V Honorship. The M/V Honorship was fixed on a time charter with NYK Line, a leading Japanese shipping company and existing charterer of the Company. The T/C commenced on June 30, 2022 and will have a term of about 20 to about 24 months. The gross daily rate of the T/C is based at a premium over the BCI.
M/V
Partnership Following the completion of her recent drydock, the charterer agreed to exercise the optional period extending the T/C until October 2022 at a higher rate based at a premium over the BCI and at an increased scrubber profit sharing scheme. In addition, the T/C provides for one more optional extension period of 11-13 months at charterer’s option.
Financing Updates
During the first half of 2022, the Company has successfully concluded new financings and refinancings of $80.3 million, out of which $59.0 million were concluded in the second quarter of 2022. Furthermore, the Company has received a commitment letter for a loan facility of up to $28.0 million, which will be concluded within Q3 2022.
Piraeus
Bank S.A On June 22, 2022, the Company entered into an up to $38.0 million sustainability-linked loan facility to (i) refinance the existing facility of $14.9 million secured by the M/V Worldship and (ii) partially fund the acquisition cost of the M/V Honorship. The facility has a term of five years while the interest rate is 3.0% plus LIBOR per annum and can be further reduced based on certain emission reduction thresholds.
Alpha
Bank S.A. On June 21, 2022, the Company entered into a credit facility for an amount of up to $21.0 million secured by the M/V Dukeship. The facility has a term of four years and the interest rate is 2.95% plus SOFR per annum.
Danish
Ship Finance Commitment Letter In July 2022, the Company obtained a commitment letter from Danish Ship Finance A/S for a loan facility of up to $28.0 million, in order to refinance an existing facility of $24.8 million secured by the M/Vs Premiership & Fellowship. The interest rate will be 2.5% plus SOFR per annum and the term of the loan will be five years. The facility will be repaid through six quarterly instalments of $1.6 million followed by 14 quarterly instalments of $1.04 million and a balloon of $4.1 million payable together with the last instalment. The existing facility that is intended to be refinanced includes a balloon payment of $23.6 million to be paid during the fourth quarter of 2022. The transaction is subject to completion of definitive documentation.
Spin-Off and distribution of
United’s shares
In July 2022, the Company completed the spin-off of its wholly-owned subsidiary, United Maritime Corporation which commenced trading on the Nasdaq Capital Market on July 6, 2022 under the symbol “USEA”. The Company’s shareholders on record as of June 28, 2022, received one United common share for every 118 Seanergy common shares. Following the spin-off, the M/V Gloriuship was substituted by the younger M/V Honorship, positively affecting the Company’s average fleet and overall operating margin.
Nasdaq Notice
The Company received written notification from The Nasdaq Stock Market (“Nasdaq”) dated August 1, 2022, indicating that because the closing bid price of the Company’s common stock for 30 consecutive business days, from June 16, 2022, to July 29, 2022, was below the minimum $1.00 per share bid price requirement for continued listing on the Nasdaq Capital Market, the Company is not in compliance with Nasdaq Listing Rule 5550(a)(2). Pursuant to the Nasdaq Listing Rule 5810(c)(3)(A), the applicable grace period to regain compliance is 180 days, or until January 30, 2023. The Company can cure this deficiency if the closing bid price of its common stock is $1.00 per share or higher for at least ten consecutive business days during the grace period.
Conference Call:
The Company’s management will host a conference call to discuss financial results today, Thursday, August 4, 2022 at 10:00 a.m. Eastern Time.
Slides and Audio Webcast:
There will be a live, and then archived, webcast of the conference call and accompanying slides available through the Company’s website. To listen to the archived audio file, visit our website, following Webcast &
Presentations. Participants to the live webcast should register on the website approximately 10 minutes prior to the start of the webcast, following this link.
Conference Call Details:
Participants have the option to register for the call using the following link. You can use any number from the list or add your phone number and let the system call you right away.
Seanergy
Maritime Holdings Corp. Unaudited Condensed Consolidated Balance Sheets (In
thousands of U.S. Dollars)
June 30, 2022
December 31, 2021*
ASSETS
Cash and cash equivalents, restricted cash and term deposits
41,357
47,126
Vessels, net
455,020
426,062
Other assets
22,546
14,023
TOTAL ASSETS
518,923
487,211
LIABILITIES AND STOCKHOLDERS’ EQUITY
Long-term debt and other financial liabilities
247,373
215,174
Convertible notes
10,245
7,573
Other liabilities
27,636
19,988
Stockholders’ equity1
233,669
244,476
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
518,923
487,211
* Derived from the audited consolidated financial statements as of the period as of that date
Seanergy
Maritime Holdings Corp. Unaudited Condensed Consolidated Statements of Operations (In
thousands of U.S. Dollars, except for share and per share data, unless
otherwise stated)
Three months ended June 30,
Six months ended June 30,
2022
2021
2022
2021
Vessel revenue, net
32,847
27,832
62,513
48,230
Expenses:
Voyage expenses
(1,667
)
(5,285
)
(2,646
)
(10,567
)
Vessel operating expenses
(10,529
)
(8,879
)
(20,441
)
(14,428
)
Management fees
(377
)
(348
)
(753
)
(629
)
General and administrative expenses
(4,205
)
(2,566
)
(8,520
)
(5,296
)
Depreciation and amortization
(7,034
)
(4,520
)
(13,299
)
(8,337
)
Loss on forward freight agreements, net
(36
)
–
(72
)
–
Operating income
8,999
6,234
16,782
8,973
Other income / (expenses):
Interest and finance costs, net1
(3,163
)
(4,277
)
(6,013
)
(8,307
)
Loss on extinguishment of debt
(6
)
–
(1,285
)
–
Other, net
105
4
122
(26
)
Total other expenses, net:
(3,064
)
(4,273
)
(7,176
)
(8,333
)
Net income
5,935
1,961
9,606
640
Net income per common share, basic
0.03
0.01
0.06
0.01
Net income per common share, diluted
0.03
0.01
0.05
0.01
Weighted average number of common shares outstanding, basic
172,559,248
160,171,874
172,437,211
137,590,311
Weighted average number of common shares outstanding, diluted
177,368,289
165,864,695
178,074,877
143,292,880
1 On January 1, 2022, we adopted ASU 2020-06, eliminating the beneficial conversion feature model in ASC 470-20. The adoption of ASU 2020-06 resulted in an increase of the Convertible notes, a reduction of the Accumulated deficit and a reduction of Additional paid-in capital.
Seanergy
Maritime Holdings Corp. Unaudited Condensed Consolidated Cash Flow Data (In
thousands of U.S. Dollars, except for share and per share data, unless
otherwise stated)
Six months ended June 30,
2022
2021
Net cash provided by operating activities
18,939
15,037
Vessels acquisitions and improvements
(37,246
)
(117,058
)
Term deposits
1,500
(1,000
)
Other fixed assets, net
(69
)
–
Net cash used in investing activities
(35,815
)
(118,058
)
Proceeds from long-term debt and other financial liabilities
80,300
104,350
Repayments of long-term debt and other financial liabilities
(47,910
)
(66,722
)
Repayments of convertible notes
(10,000
)
–
Payments of financing and stock issuance costs
(937
)
(1,096
)
Dividend paid
(8,916
)
–
Proceeds from issuance of common stock and warrants, net of underwriters fees and commissions
70
98,232
Net cash provided by financing activities
12,607
134,764
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for interest
4,798
5,160
Noncash investing activities
Vessels acquisitions and improvements
3,518
(884
)
Noncash financing activities
Dividends declared but not paid
4,460
–
Units issued for repayment of subordinated long term-debt
–
3,000
Repayment of subordinated long term-debt by issuance of units
–
(3,000
)
About
Seanergy Maritime Holdings Corp.
Seanergy Maritime Holdings Corp. is the only pure-play Capesize ship-owner publicly listed in the U.S. Seanergy provides marine dry bulk transportation services through a modern fleet of Capesize vessels. The Company’s operating fleet consists of 17 Capesize vessels with an average age of approximately 12.1 years and an aggregate cargo carrying capacity of approximately 3,020,012 dwt.
The Company is incorporated in the Marshall Islands and has executive offices in Glyfada, Greece. The Company’s common shares trade on the Nasdaq Capital Market under the symbol “SHIP.
This press release contains forward-looking statements (as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended) concerning future events. Words such as “may”, “should”, “expects”, “intends”, “plans”, “believes”, “anticipates”, “hopes”, “estimates” and variations of such words and similar expressions are intended to identify forward-looking statements. These statements involve known and unknown risks and are based upon a number of assumptions and estimates, which are inherently subject to significant uncertainties and contingencies, many of which are beyond the control of the Company. Actual results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to, the Company’s operating or financial results; the Company’s liquidity, including its ability to service its indebtedness; competitive factors in the market in which the Company operates; shipping industry trends, including charter rates, vessel values and factors affecting vessel supply and demand; future, pending or recent acquisitions and dispositions, business strategy, areas of possible expansion or contraction, and expected capital spending or operating expenses; risks associated with operations outside the United States; broader market impacts arising from war (or threatened war) or international hostilities, such as between Russia and Ukraine; risks associated with the length and severity of the ongoing novel coronavirus (COVID-19) outbreak, including its effects on demand for dry bulk products and the transportation thereof; and other factors listed from time to time in the Company’s filings with the SEC, including its most recent annual report on Form 20-F. The Company’s filings can be obtained free of charge on the SEC’s website at www.sec.gov. Except to the extent required by law, the Company expressly disclaims any obligations or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company’s expectations with respect thereto or any change in events, conditions or circumstances on which any statement is based.
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